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Lufthansa CFO Quits Amid Restructuring To Lead Haniel Group

04/25/2012 | 11:32am US/Eastern
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--Lufthansa Chief Financial Officer Stephan Gemkow to leave company early

--Gemkow's departure comes as surprise to market, but shouldn't derail restructuring

--Lufthansa says it intends to find a successor "promptly"

--Gemkow to become CEO of closely-held investment firm Haniel

(Rewrites throughout, adding Lufthansa statement, analysts' comments and background.)

By Kirsten Bienk and Natali Schwab

Of

Deutsche Lufthansa AG's (>> Deutsche Lufthansa AG) chief financial officer, Stephan Gemkow, will leave the company at his own request to become chief executive of German closely-held investment firm Franz Haniel & Cie. GmbH, both companies said in separate statements Wednesday.

Lufthansa, Europe's biggest carrier by passenger numbers, said that Gemkow had requested an early termination of his contract, which would have ended on May 31, 2014.

His request could be approved at the next meeting of the airline's supervisory board scheduled for May 7, Lufthansa said. It added that it intends to select a successor to Gemkow "promptly."

The comment came after Haniel earlier Wednesday announced that Gemkow has been chosen as new CEO of the company that owns a majority stake in Germany's largest retailer, Metro AG (>> METRO AG).

His appointment as CEO of Haniel is still subject to approval by the company's supervisory board, a Haniel spokesman said.

The departure from Lufthansa of 52-year old Gemkow--a key figure behind the carrier's shopping spree over the past few years and its ongoing push to slash costs in the face of tough competition and high fuel prices--came as a surprise to the market.

The German airline group, which carried 100 million passengers for the first time in 2011, has said it intends to reduce purchasing, administrative, and payroll costs as part of a EUR1.5 billion three-year savings plan.

It has said that its profitability needs to be increased dramatically to ensure it can finance future growth without risking its credit ratings by taking on huge amounts of debt.

Lufthansa previously said that profit margins of around 8% are "worth pursuing" and should be possible in a consolidating industry, compared with an operating profit margin of just over 3% in 2011.

At that time, Gemkow said that Lufthansa is the airline best placed to achieve profit margins of that magnitude.

While Gemkow's departure from Lufthansa was generally considered a blow to the airline, some analysts said, however, that Lufthansa's strong leadership under CEO Christoph Franz should ensure a smooth transition and continued focus on restructuring efforts, which have included the sale of U.K airline bmi to rival International Consolidated Airlines Group SA (>> International Consolidated Airlines Grp).

"Gemkow has been a solid and calm financial manager who knows what he wants," said Metzler Bank analyst Juergen Pieper. "His departure will be a loss for Lufthansa."

Pieper said, however, that Gemkow's exit shouldn't derail Lufthansa's efforts to cut costs and turn around unprofitable units like Austrian Airlines, adding that CEO Franz "is the driving force in the company."

Gemkow has been a long-time veteran of Lufthansa, having joined the company in 1990. He initially worked at the company's corporate organization and strategic development department. His other jobs at Lufthansa included managing regional sales from Washington D.C., head of investor relations, as well as senior vice president corporate finance. He became finance chief in June 2006.

-By Kirsten Bienk and Natali Schwab, Dow Jones Newswires; +49 69 29725119; natali.schwab@dowjones.com

(Jan Hromadko contributed to this article.)

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