Finnair fails to sell catering unit to Lufthansa

Finnair PLC says it has failed to sell its catering operations to LSG Sky Chefs, a subsidiary of German airline Lufthansa.

The national carrier says Lufthansa's board decided not to approve the acquisition because of "an investment freeze at Lufthansa."

The Finnish airline, which had announced the plans in March, says it will now focus on improving the productivity of its catering businesses. It is struggling against budget airlines amid fierce competition and has set a target to cut annual costs by €140 million ($185 million) by 2014.

Finnair is a client of LSG Sky Chef in many airports and said Thursday that the customer relationship will continue.