Lufthansa is in final negotiations for a sale of its LSG catering division's European operations to Switzerland's Gategroup as part of plans to focus on its airline business.
The proposed sale comes as Lufthansa contends with low margins in a competitive market, with Lufthansa's supervisory board expected to sign off on the deal on December 3, sources close to the matter said.
"The sale is part of Lufthansa's new strategy to focus on its airline business," the Garman carrier said in a statement. "Furthermore, the sale enables the new owner to further develop the catering business."
No financial details were disclosed.
Airline catering company Gategroup said that the deal, which would be subject to regulatory approval, is still under negotiation and parties are moving forward with discussions.
Verdi Concerns
German trade union Verdi has voiced its concerns over the proposed sale. The union reiterated that it views a sale as a strategic mistake and said that it could call for a strike if demands regarding jobs and employee rights are not met.
Before signing a contract with Gategroup, Lufthansa must protect the wages and working conditions of LSG employees in a collective agreement, Verdi representative Katharina Wesenick told Reuters.
Do&Co Offer Topped
Gategroup's offer topped that of industry rival Do&Co, and the two had been the last remaining contenders in a long, drawn out auction, sources familiar with the process said.
A Do&Co representative was not available for comment.
Owners
Gategroup is owned by Singapore state fund Temasek and Asian investment firm RRJ Capital, who took over the company in several steps from Chinese conglomerate HNA. Gategroup operates the Gategourmet brand.
Challenges
Lufthansa CEO Carsten Spohr has previously said that the airline's catering business was being challenged by the large number of locations it serves, high staff costs and exposure to currency exchange rates.
Auction Of International Business
The sale of LSG's European operations will be followed by an auction for its international business, which is expected to start in the first quarter, the sources added.
Small Sum
Though price detail has yet to emerge, company sources have said that Lufthansa might receive only a small sum for LSG's European operations.
Assets And Liabilities
In its financial report, Lufthansa said that it has assets held for sale worth €393 million and liabilities of €639 million related to the planned disposal of its European catering activities.
Revenue And Earnings Before Interest And Tax
In the first six months, Lufthansa's catering revenue increased by 4% to €1.6 billion while earnings before interest and tax contracted by 18% to €33 million.
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