(Updates with analyst comment in ninth paragraph.)
Feb. 7 (Bloomberg) -- Deutsche Lufthansa AG named Carsten Spohr chief executive officer to succeed Christoph Franz, handing the trained pilot the task of completing the deepest savings program yet at Europe’s second-largest airline.
Spohr, who has headed Lufthansa’s main passenger airline unit since January 2011, will become CEO on May 1, the Cologne, Germany-based company said in a statement today. Franz said in September that he’d quit in May to become chairman at Swiss drugmaker Roche Holding AG.
The change of guard comes as Lufthansa seeks to fend off competition both from discount rivals that are capturing market share on European routes and Gulf carriers eating into the more lucrative long-haul business. The airline is moving short-haul services outside Frankfurt and Munich to low-cost unit Germanwings and upgrading first and business-class cabins to make up lost ground on intercontinental operations.
“As a Lufthansa man born and bred, I view the appointment as both an honor and an obligation,” Spohr said today. “I am convinced that the company is on the right track. Together, we will make our company resilient and ready for the future.”
Franz, 53, drew criticism from employees as he sought to wring savings from Lufthansa in order to raise operating profit to 2.3 billion euros ($3.1 billion) by 2015. The program spans 3,500 job cuts to less generous retirement benefits and travel perks, and the animosity it provoked may have led him to announce his departure after less than three years as CEO.
“Europe’s big-three airlines have fallen behind while focusing on cost-cutting,” said Joern Grotepass, a consultant at AT Kearney, who specializes in aviation. “They have to an extent lost their vision.”
Lufthansa ranks behind European No. 1 Air France-KLM Group by traffic and ahead of International Consolidated Airlines Group SA, the owner of British Airways.
Spohr will give up his position at the passenger-airline unit when taking the CEO post, with a successor at the division to be identified by the end of April, Lufthansa today.
“There is relief now, both because the decision has been made and because Spohr is seen as capable,” Ruxandra Haradau- Doeser, an analyst at Kepler Cheuvreux in Frankfurt said by telephone. “Spohr stands for continuity, he will work toward the 2015 goals. Still, there is a risk he might not push as aggressively for those goals.”
Franz hammered out joint ventures for trans-Atlantic flights with United Continental Holdings Inc. and for Asian routes with All Nippon Airways, and has said the carrier may team up with China Airlines Ltd. in a similar fashion.
Lufthansa shares are leading the six-member Bloomberg EMEA Airlines Index this year with a gain of 15 percent, together with Ryanair Holdings Plc, while last year they were the index’s worst performer with a gain of 8.3 percent. They have returned 16 percent including dividends under Franz’s tenure, trailing a 59 percent gain in the index.
Born in Wanne-Eickel in Germany’s industrial heartland, Spohr earned a captain’s license for flying Airbus Group A320- series planes before taking over Lufthansa’s personnel- recruiting department in 1994.
From 1995 to 1998 Spohr was personal assistant to then-CEO Juergen Weber, and was appointed to the management board of the passenger airline in 2004. He started heading the unit seven years later, when he was also promoted to the management board.
--Editors: Christopher Jasper, Benedikt Kammel