Lufthansa has operated a rather odd structure for some years where Lufthansa as an airline is also the top of the Lufthansa Group, with a direct brand subsidiary of Eurowings. Swiss, Austrian, Brussels, are separate subsidiaries with Brussels in a bizarre cross holding with Eurowings. Edelweiss is further down the chain as a subsidiary of Swiss.
The company has now decided this isn’t the way forward and will spend a great deal of time and money to separate Lufthansa and create a new Lufthansa Group – with Lufthansa as an airline on the same footing as Swiss and Austrian, Eurowings will also be separated out as a subsidiary of Lufthansa airline.
There’s also a suggestion – not that it’s been confirmed in any way – that Lufthansa Cargo May be separated from Lufthansa airline as a subsidiary. That would force it to be a free standing company and entirely responsible for its own performance separate from the passenger airline.
Lufthansa Technik – the maintenance and training arm which has a global leadership presence in its market, will also become a Lufthansa airline subsidiary.
LSG Skychefs, the groups catering arm, is already being sold off and the Group is leaving the catering business completely, Gategroup recently purchased a significant part of the business.
So Lufthansa Group’s eventual structure will be like this:
Lufthansa Group – Holding Company
Lufthansa Technik, LSG Group until sold, possibly Lufthansa Cargo, Eurowings.
What does this mean? For Lufthansa IT and administration it’s going to be a major shake up. I’ve personally overseen two such regroupings and one of this scale could take three years to complete, maybe four. There are huge technical, legal and practical obstacles to overcome.
However the long term offers the new Group structure the ability to buy into and own shares and positions in other airlines and support businesses much in the way IAG and Delta do. Arguably it would have made it a lot easier to buy Thomas Cook and/or Condor by keeping them at a financial distance from the main airline.
If for example Norwegian was for sale? Lufthansa Group could buy it without it impacting the Lufthansa airline financially, making the risk and opportunity of a take over far easier. The same problems dogged the Laudamotion buy, but that saw that lost to RyanAir. There’s a lot more flexibility as a Group – RyanAir, IAG, AF-KLM have all proved it. It’s been the cost that’s held it back – less than a billion Euros is unlikely, long term it will be worth it.