Deutsche Lufthansa AG shares dropped 5.7 percent Friday after the surprise departure of Chief Financial Officer Simone Menne opened an unwelcome hole in the German airline’s top management at a time when its strategy is in a state of flux.
Lufthansa will seek to fill the CFO role “shortly” after granting Menne’s request to prematurely terminate her contract as of Aug. 31, it said in a statement late Thursday. The executive, who turns 56 in October, is leaving for the same financial role at closely held pharmaceutical business Boehringer Ingelheim. She said last year that she eventually wanted to head a company in Germany’s benchmark DAX30 stock index.
“There was no indication that this might happen,” said London-based Liberium Capital Ltd. analyst Gerald Khoo. “She is well-regarded by investors. They will want to know why this happened, and why it happened now.”
Menne’s departure comes at a sensitive time for Lufthansa. Conflicts with labor unions over cost-cutting efforts remain unresolved, and the rampup of the Eurowings low-cost arm has been sluggish. The projects are critical to fend off discounters Ryanair Holdings Plc and EasyJet Plc on European services amid increasing competition for lucrative long-haul flights from the likes of Dubai-based Emirates.
Eurowings, which suffered a decline in its May load factor of 2 percentage points, will post a loss this year as it restructures its fleet, executives said at an investor briefing Friday in London. The brand has “lots to do” regarding improvements in customer service, while its occupancy rate, trailing rivals including Ryanair, will improve only “slightly” this year.
Investment Grade
Menne, a member of Lufthansa’s management board since 2012, has helped Chief Executive Officer Carsten Spohr, who is six years younger, steer the company through restructuring including cutting benefits and pay for entry-level workers. She also helped safeguard its investment-grade rating, a rare honor for an airline, even with pension liabilities surpassing 10 billion euros ($11.3 billion) last year.
The lack of a successor is unsettling for investors, since it took the company five months to appoint Spohr after his predecessor Christoph Franz left in the midst of heavy restructuring two years ago. Lufthansa shares fell as much as 68.5 cents to 11.32 euros, the lowest intraday price since September 2015, and were down 5.6 percent as of 1:18 p.m. in Frankfurt.
Menne’s switch to Boehringer after finding her path to the top job at Lufthansa thwarted by the airline’s tradition of hiring engineers, means the DAX loses its sole female CFO. Only beauty products and adhesives producer Henkel AG has a woman, Simone Bagel-Trah, chairing its supervisory board, while none of the country’s 30 biggest listed companies are headed by a woman.
Lufthansa is reining in expansion plans as a glut of plane seats depresses ticket prices and travelers delay bookings amid fears of terror attacks. Capacity growth this year will trail the previous target of 6 percent, Spohr said in an interview last month. The cuts will come on short- and long-haul routes at Lufthansa’s namesake brand while Eurowings will continue to grow, he said.
‘Proven Worth’
A graduate in business administration, Menne began her professional career in the auditing department of ITT in the U.S. in 1987 before joining Lufthansa as an auditor in April 1989. Ten years later she took over the airline’s financial management and human resources in southwest Europe, rising to the same position for all of Europe two years after that. Outside Lufthansa, Menne is a member of the supervisory boards of BMW AG and Deutsche Post AG.
“In Simone Menne we are losing an experienced executive who has proven her worth time and again in her long Lufthansa career,” Supervisory Board Chairman Wolfgang Mayrhuber said in the statement.
Bloomberg
Lufthansa CFO resigns
