Europe's largest airline Lufthansa will outsource the bulk of its IT infrastructure and staff to IBM under a seven-year, €1 billion (A$1.4 billion) deal.
Around 1400 employees of Lufthansa Systems will transfer to IBM as part of the new contract, which was first flagged in October.
On top of handling individual infrastructure services, IBM will manage Lufthansa Systems' entire data centre operations, help desk and printer services, the two companies said.
IBM said it will first work to make the airline's IT processes more efficient, which it expects will save Lufthansa around €70 million (A$100.5 million) a year, in order to prepare it for more innovative technologies.
The "multi-stage transformation" of Lufthansa's IT environment will also kick off with new collaboration and messaging tools, network and voice services, and later move to areas such as cloud computing, analytics and mobility.
Lufthansa chief financial officer Simon Menne said the airline was not only looking to lower costs, but also to "continue digitalising our business processes to increase efficiency and customer focus".
The German airline has come under financial pressure in recent years from low-cost rivals, and is restructuring and cost-cutting to remain competitive.
“Outsourcing the IT infrastructure to IBM will strengthen the competitiveness of the Lufthansa Group as a whole. The transformation plan will directly improve our cost base," Menne said in a statement.
The deal is subject to approval by German and European Union antitrust authorities and the Lufthansa supervisory board.
IBM will start providing infrastructure services from April 1, 2015, Lufthansa said.