The group currently serves 275 million in-flight meals and includes substantial retail operations.
The Lufthansa Group is selling what remains of its LSG Group business. This divestment of the catering and in-flight retail aspect of operations is part of the Lufthansa Group’s strategy to focus more on its airline business in the future. The purchaser, AURELIUS, and its team of operational specialists announced they aimed to use its experience in corporate carve-outs to transition LSG Group from being a Lufthansa subsidiary to a standalone business.
The agreement was announced without either party disclosing the sum. Still, the LSG Group (LSG Sky Chefs and Retail inMotion) ended the fiscal year 2022 with a consolidated revenue of €1.96 billion ($2.15 billion). The latest figures represent a 75% increase over 2021, equalling 85% of its pre-pandemic revenues in 2019.
What does the deal encompass?
The LSG Group, which is headquartered near Frankfurt, Germany, serves around 275 million classic airline catering meals in 49 countries. The spin-off transaction includes all traditional in-flight catering, onboard retail and food commerce activities, and the LSG Group’s brands. The deal also consists of all 131 LSG Sky Chefs Customer Service Centers across the Americas, Asia-Pacific, and Emerging Markets regions. The group previously sold off its European activities to gategroup in 2019.
The acquisition includes the onboard retail expert Retail inMotion, based in Europe and specializing in in-flight sales, product development, and technology solutions. Together with its SCIS Air Security Services in the United States, the LSG Group employs roughly 19,000 staff across its 36 joint ventures globally. Remco Steenbergen, Chief Financial Officer at Deutsche Lufthansa AG, commented on his optimism for the group’s future:
“We are pleased to have found the right investor for the LSG Group going forward that also has the full support of the LSG Group management. We are confident that AURELIUS will enable the LSG Group to be well positioned in the years ahead. In turn, it enables us to focus even more on further improving the profitability and capital returns of the Lufthansa Group core business,”
Photo: LSG Group
The divestment of the catering segment is expected to positively affect Lufthansa Group’s operating margin and capital return as it seeks to streamline its operations.
What is next for the LSG Group?
The group announced it would continue to concentrate on executing its strategy to leverage growth opportunities and encourage innovation with the support of its new owner AURELIUS. This existing strategy is built around the three pillars of airline catering, onboard retail, and food commerce. The new investors believe the LSG Group is ready and well-positioned to capture the growth opportunities available as the post-pandemic travel recovery continues and leverage its new connections and opportunities to its advantage.
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The LSG Group already has a significant amount of clients besides the core Lufthansa Group Carriers. The group signed new contracts with Condor, Greater Bay Airlines, Turkish Airlines, Virgin Atlantic, Vietnam Airlines, and Air New Zealand in the past year. Existing contracts with the likes of Copa Airlines covering 23 stations in North America and Canada for another three years, China Southern Airlines in Thailand, and GOL operations in Brazil. LSG Group CEO Erdmann Rauer highlighted the moves as the start of a new era:
“This is the beginning of a new chapter for the LSG Group.
“With AURELIUS, we have found a trustworthy partner who buys into our global strategy, which focuses on the three pillars of airline catering, onboard retail and food commerce. We are excited about what the future holds for our company – especially for our employees – and the many business opportunities we plan to seize. With the support of AURELIUS, we are confident that we will drive decisive change within our industry.”
The transaction is expected to close by the third quarter of this year, pending all relevant external approvals and internal carve-out activities.