Lufthansa Prepares To Outsource IT Business To IBM

German airline company Deutsche Lufthansa AG said Wednesday that it is close to finalizing a long-term deal to outsource its IT infrastructure division to IBM. The deal would lead to a reduction in costs in the long term but result in a charge of 240 million euros ($305.57 million) in 2014.

The company said that it will outsource its entire IT infrastructure service to IBM for seven years in a move that is expected to help the company save nearly 70 million euros every year. The impact of the charge is not expected to be recognized in the company’s operating result. The final terms and conditions of the deal are still to be negotiated with IBM.

Simone Menne, a member of the executive board and chairperson of the supervisory board of Lufthansa Systems said, in a statement on Wednesday that the move will “directly improve our cost base and allows access to the latest IT technologies which we will use to continue digitizing our business processes in order to increase efficiency and customer focus.”

Lufthansa plans to split Lufthansa Systems into three companies and sell the infrastructure segment as a part of the outsourcing process. The other two parts - - Airline Solutions and Industry Solutions divisions of the Lufthansa IT subsidiary - - will operate as independent companies, the company said in the statement.

Lufthansa Systems’ split and the formal launch of the new companies are expected to take place in the first quarter of next year.