Lufthansa Group allegedly considers conversion to a holding structure

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Lufthansa is considering a new structure to become more efficient. Thus, the company is reviewing a conversion to a holding, reports newspaper “Handelsblatt” without further reference to the source.

The Lufthansa Group regularly reviews the current Group structure to ensure the future viability of the Group,” commented Lufthansa, according to the rumours reported by “Handelsblatt“.

According to the report, parts of the board of directors together with the supervisory board of Lufthansa are the driving forces behind the plans. The International Airline Group IAG serves as an example for such a streamlining: the individual brands could move more freely under the umbrella of a holding company and thus achieve higher profits.

According to its own statements, IAG exercises vertical and horizontal influence on its corporate portfolio. The portfolio is therefore based on a common integrated platform that promotes “efficiency and simplicity” and enables any operating company to achieve its “individual performance goals“.

The IAG airlines British Airways, Iberia, Aer Lingus, Vueling and Level operate independently. The parent company is assisted by a “Management Committee” consisting of the heads of all operating companies and the management of IAG.

By contrast, the Lufthansa Group is positioned as a global aviation group with around 550 subsidiaries and associated companies. The portfolio is divided into three main units: Network Airlines, Point-to-Point Airlines and the Aviation Service Companies. The Finance, Human Resources and Operations departments are centrally managed.

The only exception in the Lufthansa Group is currently Eurowings. With Thorsten Dirks as CEO, the low-cost airline is the only airline in the group to have its own board. The new structure was adopted in 2015 and introduced in 2016. In return, the core division Lufthansa Passage was eliminated. Since then, all hubs and the premium airlines Lufthansa, Swiss and Austrian have been merged.

At the time, the aim was to centralise Lufthansa, Swiss and Austrian’s flight offerings for cost reasons and to distribute the tasks among them. Austrian has been managing product management ever since. In return, the revenue management for all network airlines is located at Swiss. The worldwide distribution is controlled at the Lufthansa hub in Frankfurt, the marketing is located in Munich.

According to “Handelsblatt“, the low market value is now a serious problem for Lufthansa. CEO Carsten Spohr has come under mounting pressure after a broader industry downturn that has in particular inflicted losses on its Eurowings budget operation. Lufthansa shares have fallen 30% over the past year and the company was only worth a good seven billion euros on the stock market. However, the aircraft and the spare parts warehouse alone would have a book value of 19 billion euros.

On Tuesday, the company presents its quarterly figures. After a bad first quarter and a profit warning, the group is now forced to move. Should the considerations for a holding structure be confirmed, this would lead to renewed restructuring.

Lufthansa had just announced at an analysts’ conference that the long-haul business of the actually independent Eurowings would be carried out by the network airlines.

How will Brussels Airlines fare in the new structure? Probably with the same kind of independence as the network airlines. The rumours don’t say a word about it: “de minimis not curat praetor“!

Sources: Handelsblatt, Reuters, airliners.de

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