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Lufthansa decides to partially sell the technology

Engine maintenance at Lufthansa Technik

Lufthansa management has now decided to separate from a part of the technology subsidiary. A sale to financial investors is preferable.

(Photo: dpa)

Frankfurt After months of evaluation, Lufthansa management has decided to separate from a part of the technology and maintenance subsidiary Lufthansa Technik (LHT). This emerges from the speech by Lufthansa chief Carsten Spohr at the annual general meeting on Tuesday.

“We are convinced that greater independence from the group will be good for the further development of Lufthansa Technik,” Spohr said in the previously published speech: “This is why we are making preparations for the sale of a minority stake in the coming year. Company spokesman referred to Spohr’s speech but declined to provide further details.

Spohr’s team has long considered the possibility of separating from a part of the tech subsidiary. The first ideas for this existed even before the pandemic. The context: Lufthansa wants to focus more on its core business, the transport of people and goods. At the same time, management hopes to better demonstrate the value of the whole group.

Last year Lufthansa Technik, with as many as 20,000 employees, achieved a turnover of four billion euros and an adjusted operating profit (EBITDA) of 384 million euros. The engine and maintenance specialist MTU Aero Engines is listed on the stock exchange at 19 times its operating profit, for a total of almost ten billion euros and therefore more than the entire Lufthansa Group (a good eight billion euros).

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LHT could be valued at more than five billion euros in a partial sale, with some even expecting a valuation of seven to eight billion euros, including debt, financial sources said. Citi and JP Morgan are advising Lufthansa on the transaction.

According to bankers and insiders, Lufthansa wants to target financial investors only as potential buyers. You could support the management of LHT in aligning the Lufthansa branch even more optimally than before. In a few years, investors could then take their package on the stock exchange. The sticking point in talks with private equity investors could be the claim that Lufthansa would grant to investors.

Not only consent to partial sale in the group

Whether it comes to this depends crucially on the offers. Management still has the option to discontinue the partial sale in the next year if the obtainable price is too low or the market environment is not right, according to the company. “For us, a strict and simple rule applies: Every transaction must create value,” said CEO Spohr’s speech at the Annual General Meeting.

Carsten Spohr

“We have a strict and simple rule: every transaction must create value,” said the CEO.

(Photo: images imago / Lackovic)

Not everyone in the Lufthansa group appreciates a partial sale of Lufthansa Technik. On the one hand, the subsidiary is closely linked to the core business. Maintenance licenses for Airbus and Boeing jets depend, among other things, on whether the group itself uses these aircraft. Furthermore, LHT is considered to be one of the company’s hotbeds. Former Lufthansa CEOs such as Wolfgang Mayrhuber and Jürgen Weber started their careers at the Hamburg branch.

Knowledge of Lufthansa Technik also plays an important role when it comes to making flying sustainable. Ideas such as a special coating for the fuel-saving wings, the so-called shark skin, were developed by the engineers of Lufthansa Technik together with experts from BASF. At the same time, the offshoot helps with its proceeds to cushion the volatility of the core business. On the other hand, management can use the sales proceeds to reduce the debt burden. During the crisis, Lufthansa accumulated credit debt of € 16.7 billion.

With the pivotal decision on Lufthansa Technik, Spohr and his team want to show investors that they take their sales ideas seriously. In fact, a decision on the technology subsidiary is expected to be made by the end of last year. After the group finally repaid German state aid faster than expected, the selling pressure eased slightly. Plans are now gaining momentum.

>>> Read this: Unused tickets, more debt, new jets: Lufthansa is now facing these challenges

This also applies to the planned sale of the business travel service provider Airplus. In the meantime it had been suspended, but now the talks have resumed. “We have started a process to find a buyer for our Airplus credit card business,” Spohr said in his speech.

Airplus could be valued at around € 1 billion if sold, people familiar with the transaction said. American Express and Mastercard credit card companies as well as related companies are named as possible offerors. Bankers report that it is still unclear how long the Goldman Sachs-led sales process will take. Business travel bookings are on the rise again. Assumptions about the recovery of demand from the pre-pandemic level will have a significant impact on the assessment.

Moreover: At Lufthansa, the black numbers are getting closer

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