Lufthansa signs long-term outsourcing deal with IBM

Lufthansa is in final negotiations with IBM Global Services to outsource its IT infrastructure services

Lufthansa is in final negotiations with IBM Global Services to outsource its IT infrastructure services in a seven-year deal that will see the German airline’s IT services division broken up as the infrastructure element moves to IBM.

The seven-year deal, which aims to reduce costs by €70m a year, is yet to be signed off.

Lufthansa will incur €240m costs related to restructuring, which will include splitting the company’s IT group, Lufthansa Systems , into three companies and selling the Infrastructure part as part of the outsourcing deal. 

The other divisions of the IT subsidiary, Airline Solutions and Industry Solutions, will operate as independent companies in their respective markets in the future, from the first quarter of 2015. As well as providing IT services to the airline, Lufthansa Systems has 450 external customers.

“The deal will directly improve our cost base and allows access to the latest IT technologies which we will use to continue digitising our business processes in order to increase efficiency and customer focus,” said Simone Menne, CFO at Deutsche Lufthansa.

She added that employees moving to IBM will have better job prospects. “This will also give the employees of the Infrastructure division clear job prospects and enable them to participate in future technological developments.”

Lufthansa also hopes to benefit from IBM’s “economies of scale, the variety of experience in the operative business and strength of innovation”.

IBM will take on 1,400 employees from the Lufthansa Systems Infrastructure division. Lufthansa Systems sites in Kelsterbach and Budapest sites will be retained by IBM and the supplier has made commitments to preserve jobs at the other sites.

In February, Lufthansa contracted Dell Services to provide maintenance and support for core front-end systems for five years. The agreement uses offshore and on-site services. The agreement saw Dell Services take over the maintenance and support the Lufthansa ticketing and reservations passenger booking system.

Read more on Offshore IT services