Lufthansa CEO Franz Quits in Surprise Move to Roche

Deutsche Lufthansa AG Chief Executive Officer Christoph Franz announced his surprise departure to become chairman at Swiss drugmaker Roche Holding AG, leaving the airline in limbo in the middle of a turnaround.

Franz, 53, said he informed Chairman Wolfgang Mayrhuber today that he’s not available for an extension of his contract, which expires on May 31 next year. Lufthansa will consider internal and external candidates to succeed Franz, who will take over from Franz Humer at Basel-based Roche, where the airline CEO has been a member of the board since 2011.

Franz, who lives in Zurich after leading Lufthansa’s Swiss subsidiary, has been commuting to the group’s operational headquarters in Frankfurt since becoming CEO in 2011. He embarked on a savings program that included 3,500 job cuts and a fleet renewal using more fuel-efficient models to raise the operational profit to 2.3 billion euros ($3 billion) in 2015.

“Don’t expect any major change with regard to the way forward,” Franz said. “There is no alternative.”

Much of the savings will be in place by the time he leaves next year, Franz said. The program is on track, he said.

On Track

Cologne-based Lufthansa rose as much as 1.7 percent and was trading 0.3 percent higher at 13.99 euros as of 3:00 p.m. in Frankfurt. The stock has declined 1.8 percent this year, valuing the airline at 6.5 billion euros. Roche rose 0.6 percent to 238.30 Swiss francs in Zurich trading, valuing the business at 205 billion francs ($221 billion).

Humer led Roche for more than a decade, and his departure coincides with a change of guard at cross-town rival Novartis AG, where Daniel Vasella handed the chairman reins to Joerg Reinhardt in February.

Franz will inherit a company whose success in developing and marketing new cancer drugs has been tempered by failures in other areas of research. Roche abandoned its latest experimental diabetes drug over safety concerns in July and has said it may stop trying to develop heart and metabolic drugs altogether.

Roche has said it expects eventually to face competition from cheaper biosimilar copies of its top-selling Rituxan leukemia treatment and its Herceptin breast-cancer drug. The Swiss drugmaker has sought to make newer and better drugs in each area and won U.S. approval this year for the new breast tumor drug Kadcyla.

Drug Trials

“Franz is well-connected in Europe, and he speaks the language and knows the culture,” said Fabian Wenner, a Zurich-based analyst at Kepler Cheuvreux with a buy rating on the stock. “The question is, what can he bring Roche? Does Roche need someone who has a deeper knowledge of the pharma business? Roche is really deeply rooted in the biotech business.”

Roche is also considering building its portfolio with takeovers, an area in which Humer, 67, wielded significant influence. The retiring chairman was CEO in 1999, when Roche bought a 30 percent stake in U.S. biotechnology company Genentech -- the deal that netted Roche both Herceptin and Rituxan -- and helped oversee the full takeover of the company as chairman in 2009.

Humer was paid 8.7 million francs at Roche last year, with Franz earning 2.6 million euros at Lufthansa. Pay was not the reason for the switch, Franz said.

Fleet Expansion

Lufthansa is preparing to announce as soon as this week its biggest fleet order ever, with more than $14 billion in purchases planned from Boeing Co., the world’s biggest planemaker, and Airbus SAS, people familiar with the plan said. Franz said he expected routine business decisions to be unaffected by his announcement.

The departure comes four months after Mayrhuber, Franz’s predecessor, withdrew his candidacy to join the supervisory board over investor opposition only to change his mind 12 hours later. Among possible successors for Franz is Carsten Spohr, who leads the Lufthansa passenger subsidiary, the company’s largest unit, and is a trained pilot.

“It’s disappointing that one of the key protagonists in pushing through the score program is departing before its completion,” said Donal O’Neill, a Dublin-based analyst at Goodbody with a buy recommendation on the stock. “But I suspect there are plenty of internal and external candidates who can take up the role.”

Before it's here, it's on the Bloomberg Terminal.