Carsten Spohr: “Selling a company the size of LSG has never happened at Lufthansa”

GERMANY. Lufthansa Group has made it clear that the divestment of inflight services specialist LSG Group – which includes travel retailer Retail inMotion, LSG Sky Chefs, Evertaste, and Spiriant – might mean the break-up of the business. The company generated revenue of €3.2 billion in 2018, flat versus 2017.

At Lufthansa’s Capital Markets Day 2019 last Monday, Chairman of the Executive Board and CEO Carsten Spohr told the audience that compared to its other two non-passenger businesses – Lufthansa Technik and Miles & More – LSG Group lacked the required synergies to keep it in the portfolio.

Emphasising its non-core status, he added candidly: “LSG is always second when it comes to management attention, and also capital allocation, so there is probably a better owner for them.” But the sale process does not guarantee a single buyer. “There is competition between potential strategic buyers,” he said. “Will it all go in one piece or will it go in different pieces? We are keeping our options open to create the maximum value.”

While LSG is a multi-billion euro group, it had flat sales last year and also had a much lower adjusted EBIT margin (3.2%) compared to Lufthansa Technik (9.9%) and Miles & More (7.2%). The recent major contract win by Retail inMotion to manage Cathay Pacific Group’s travel retail programme will, however, be a major selling point.

Spohr said: “Selling a company the size of LSG has never happened at Lufthansa. We are not shying away, as a board, from touching the former holy cows in the company.”

Lufthansa’s rationale for selling LSG Group is that the carrier is increasingly focusing on its airline business (above) and only wants non-passenger businesses (below) that have close synergies with its core market. LSG isn’t one of those.