LSG Group: Transformation in Europe continues

Establishment of regional production centers necessary to make business model more flexible

March 8, 2018

Neu-Isenburg, Germany – On March 7, the Supervisory Board of LSG Lufthansa Service Holding AG (LSG Holding) approved the establishment of two regional production centers (RPCs) as the next step in their effort to centralize production and logistics in Europe. That follows an announcement in the summer of 2016 stating that the company would adjust its production landscape on the Continent according to changing market requirements by making its operating model more flexible.

“This decision is an important milestone in the transformation of our business model as part of our strategic realignment,” said Erdmann Rauer, CEO of the LSG Holding. “Through it, we want to become more competitive in Europe and advance our goal of becoming a provider of end-to-end onboard products and services.”

Last year, the company successfully tested the centralized production of certain meals in a single-shift operation (including the associated logistics) at a plant in Bor, Czech Republic. The evaluation of this pilot project confirmed the viability of a network-oriented production approach. Furthermore, all key performance indicators that were agreed on with the customer consistently exceeded the target values. Since January of this year, additional meals have been added to this operation (now referred to as “RPC East”), which is now working in two shifts. This has also led to further process optimization.

Each RPC will be able to deliver to locations within a radius of up to 450 km (about 280 miles). While the RPC East can supply Berlin, Frankfurt, Munich and Vienna, the future RPC West will be able to provide hot meals (including ethnic meals) to Amsterdam, Brussels, Cologne, Dusseldorf, Frankfurt, Paris and Zurich. Locations for RPC West are currently being scouted.

“The establishment of the regional production centers will enable us to react more quickly to changes in the market,” added Erdmann Rauer.  “As a result, our classic catering production and logistics structures will become significantly more flexible. At the same time, we are working with our onboard retail experts at Retail inMotion to create digital platforms that can meet the growing demand from airlines and consumers for pre-ordering concepts. Our most important strategic challenge is to bring these two business models together in a complementary manner in order to make the future of the entire LSG Group increasingly sustainable and profitable.”

The company is now working out the details of the design of the two RPCs in order to have the new sites operational by early 2020.

The LSG Group is the world’s leading provider of end-to-end on-board products and services. These include catering, onboard retail and entertainment, onboard equipment and logistics, consulting and lounge services. The company’s dedication to culinary excellence and expertise in logistics has led to its successful entry into adjacent markets like train services and convenience retail. Its catering activities are marketed under the “LSG Sky Chefs” brand name, through which it delivers 591 million meals a year and is present at 211 airports in 50 countries. In 2015, the companies belonging to the LSG Group achieved consolidated revenues of € 3.0 billion.