* Christoph Franz leaves for Swiss drugmaker Roche
* Franz had introduced tough cost-cutting under SCORE
* CEO unpopular with unions, staff
* Possible replacements include board's Spohr, Hohmeister
By Marilyn Gerlach
FRANKFURT, Sept 16 The unexpected departure of
Lufthansa Chief Executive Christoph Franz risks
throwing the German flagship airline off course as it struggles
to remain profitable despite cut-throat competition and soaring
Franz will leave Lufthansa when his contract runs out in May
next year, waving goodbye to strife with employees to join his
wife and five children in Switzerland where he is to become
chairman of Swiss drugmaker Roche.
"The departure of its CEO will be a huge blow for the
airline. Franz has been the mastermind behind the restructuring
and the renovation of Europe's largest airline group," Equinet
analyst Jochen Rothenbacher said.
Like Air France-KLM and International Consolidated
Airlines Group, which groups British Airways and
Iberia, Lufthansa is undergoing deep cuts to cope with soaring
fuel costs and competition from Middle East rivals and low-cost
After taking the helm of Lufthansa in January 2011, Franz
launched Lufthansa's most aggressive cost-cutting programme in
nearly two decades - dubbed SCORE - to quadruple operating
profit to 2.3 billion euros ($3.1 billion) by 2015.
He clashed with labour representatives over plans to cut
3,500 jobs, gaining a reputation for a hard-nosed approach and
clumsy communications with the company's 117,000 employees.
He has defended SCORE, saying the airline industry has its
back against the wall and market shares are being eroded.
One union official, who declined to be named, called him a
"devil". "That he is going lends credence to our suspicions that
he was brought into Lufthansa in the first place to do the dirty
job of firing people."
Although employee representatives had been considering
voting against renewal of Franz's contract if the issue came up,
analysts and investors have applauded the CEO's efforts to cut
costs to protect earnings.
Lufthansa has remained profitable at an operating level,
unlike other European full-service carriers.
Last year, Lufthansa made an operating profit of 524 million
euros ($695 million), compared with losses of 613 million for
IAG and a loss of 300 million for Air France-KLM.
"It's disappointing because he (Franz) is very instrumental
and a vocal part in terms of pushing through the restructuring,"
Goodbody Stockbrokers analyst Donal O'Neill said.
German media named three possible candidates to succeed
Franz, all Lufthansa veterans. They are Lufthansa management
board members Carsten Spohr and Harry Hohmeister and Lufthansa
Cargo CEO Karl Ulrich Garnadt.
"If you are already a board member, like Carsten Spohr, then
you stand a good chance of becoming the successor," a company
Spohr, a 46-year-old German from Wanne-Eickel in the
country's industrial heartland, worked his way up through the
ranks to become the CEO of Lufthansa Cargo in 2007.
Four years later, Spohr, who holds a commercial pilot's
licence to fly Airbus A320-family planes, was promoted to the
group's management board to oversee its passenger airline
business, taking over from Franz.
Spohr has had a rocky time, with passenger airlines taking
the biggest hit from Franz's savings programme and therefore
drawing the most wrath from workers over job cuts.
Hohmeister, 49, started his career at Lufthansa almost 30
years ago and replaced Franz as the chief of Lufthansa airline
Swiss, which accounted for more than a third of group operating
profit last year.
"It looks like Hohmeister is doing a good job in his present
portfolio," said a Lufthansa person familiar with the matter,
who asked not to be named.
The same source added that for the CEO job, Lufthansa Cargo
chief Garnadt "would be the last person I would think of".
At 56, Garnadt is the oldest of the three and the only one
who is not on the group's management board.
Lufthansa still has until next May to pick a replacement.
Franz told analysts not to expect any change of course.
"Given the competitive environment that we are in, I am
deeply convinced that there is no alternative to the way
forward, even if this includes some unpopular decisions," he
said on Monday.