Lufthansa CFO Simone Menne

Who says IT outsourcing is dead? IBM just bagged its biggest new customer of the year in the form of German flagship air carrier Lufthansa AG. The airline agreed to sell its IT services division to IBM, which will run it on a contract basis for at least the next seven years.

The deal follows Lufthansa’s decision to break up its Lufthansa Systems subsidiary, which has three separate divisions for Infrastructure, Airline Solutions and Industry Solutions. The infrastructure division will be sold, while the other two will remain with Lufthansa but operate as independent companies.

Lufthansa said it will be able to focus on doing what it does best – flying airplanes – while reducing its IT costs by about 70 million euros ($88.6 million) annually.  The deal is subject to “final negotiations”, but is likely to be concluded soon.

Outsourcing its IT operations to IBM “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,” said Lufthansa’s chief financial officer Simone Menne. “This will also give the employees of the infrastructure division clear job prospects and enable them to participate in future technological developments,” Menne said.

The majority of Lufthansa Systems Infrastructure’s 1,400-strong workforce will transfer to IBM as part of the deal, the companies added.