Lufthansa signs £800m outsourcing deal with IBM

IBM reportedly fought off competition from HP and Atos for seven-year deal

German national airline Lufthansa has signed a seven-year £800m outsourcing deal with IBM for the technology giant to deliver IT infrastructure services to the company.

IBM claims that the agreement, which is still subject to the approval of the Lufthansa Supervisory Board and antitrust authorities, will optimise the airline's IT processes to increase efficiency and therefore generate cost savings of €70m.

Just a month ago, the airline said it would save "at least" €70m on IT infrastructure costs every year if it signed a deal with IBM.

IBM had reportedly been fighting it out with HP and French IT services firm Atos to acquire Lufthansa's IT infrastructure business, which had been up for sale since the beginning of April.

Now that the deal has been signed, Simone Menne, CFO at Deutsche Lufthansa AG and chairperson of the supervisory board of Lufthansa Systems AG, said that the agreement would "strengthen the competitiveness of Lufthansa Group as a whole".

"The transformation plan will directly improve our cost base. Together with IBM we will have access to the latest IT technologies not only to lower our cost but also to continue digitalising our business processes in order to increase efficiency and customer focus," she said.

IBM will manage Lufthansa Systems' entire data centre operations, help desk and printer services along with individual infrastructure services.

About 1,400 Lufthansa Systems employees will transfer to IBM as part of the deal, and infrastructure services will start to be delivered by IBM from April 1, 2015.

According to the terms and conditions of the deal, Lufthansa will incur €240m in what it calls "one-time charges" arising from the restructuring the outsourcing deal will entail.

Lufthansa wanted to split Lufthansa Systems into three companies, with the infrastructure division being sold as part of the outsourcing process. The airline solutions and industry solutions divisions of Lufthansa's IT subsidiary are to operate as independent companies in their respective markets in the future.