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October 22, 2014

Lufthansa nears data centre sell off to IBM

German airline cannot keep up with scale of data centre and networking investments.

By Ben Sullivan

Lufthansa, the German international airline, has said that it is close to securing a deal with IBM to sell its IT infrastructure unit.

Lufthansa has the highest revenue out of all the European airlines, but is currently going through restructuring and cost-saving efforts so it can compete with Europe’s budget airline rivals.

The Lufthansa unit provides data centres and networking equipment, but the airline said it was seeking a buyer earlier in the year as it cannot provide the scale of investment needed to sustain such operations.

If the deal goes ahead, Lufthansa’s IT internal infrastructure service requirement will be outsourced to IBM under a seven-year contract.

The infrastructure agreement would save Lufthansa €70 million a year in IT costs, costing the airline €240 million initially to seal the deal. A Lufthansa spokesperson told Reuters that a final price is still being negotiated.

1,400 people are employed in the infrastructure business of Lufthansa, accounting for 40% of Lufthansa Systems’ €640 million turnover in 2013. However, the division only accounted for a quarter of the firm’s profit.

The deal is expected to be complete by March 31 2015.

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On Monday IBM reported a 4% drop in revenue. The results were blamed on weaker sales because of a ‘marked slowdown’ in buying behaviour in September.

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