It’s been a massive year for LOT Polish Airlines as it continues its restructuring to return the Star Alliance member to sustainable profitability. Its future was effectively safeguarded just months ago when the European Commission formally approved its restructuring plan and ruled the PLN 804 million (around €200 million) of state aid granted to the carrier lawful in terms of the provisions of EU legislation.
The Commission found, in particular, that LOT's restructuring plan will allow the company to become viable in the long-term without unduly distorting competition in the Single Market. “The Commission’s investigations of our Restructuring Plan confirmed that we are adhering to the provisions of EU law,” the carrier’s chief executive officer, Sebastian Mikosz, told The HUB at this year’s World Routes forum in Chicago, USA.
“We have indeed cut our costs dramatically, and have improved our revenues so that, after many years of losses, LOT can finally return to sustainable profitability. The measures foreseen in the Plan avoid distortions to the market, and ensure our long-term competitiveness,” he added.
In 2012, LOT filed for and received rescue aid which was approved by the European Commission in May 2013 subject to the submission of an EU-conform Restructuring Plan. It has subsequently developed and implemented a far-reaching restructuring plan, which offset the distortive effects of the rescue aid by discontinuing several profitable routes, reducing the amount of capacity and providing significant contributions towards the cost of restructuring.
LOT has been in financial difficulties for several years, reporting significant losses and negative equity, but in 2013 it recorded for the first time in five years a net profit of PLN 26 million, instead of almost PLN 200 million loss envisaged in the Restructuring Plan presented to the European Commission. This was its first annual net profit since 2007.
“Our improving results reflect their valued recognition. LOT is becoming a modern and flexible European carrier connecting Poland, Central and Eastern Europe with key regions of the world, which can quickly react to and address the expectations of the market,” said Mikosz.
LOT continues to perform as predicted in the annual financial forecast. “This means that by the end of 2014, the airline will reach the result on its core business of PLN70 million ($21.2 million) in the black. This is consistent with the assumptions of the restructuring plan,” said Mikosz.
LOT continues to consistently implement the Restructuring Plan, and the European Commission will monitor it through to its conclusion in October 2015. This will continue to restrict development plans but the carrier has ambitions to further develop its profitable flying from 2016 and after reducing its cost base to be more competitive against the LCCs that operate the majority of seats in the Polish market, it is now on a more stable footing.
“Until the end of 2015 we will be restrained, but from 2016 we can fly new routes. One of the target points and key elements of our restructuring is to grow the company and open new connections,” said Mikosz, confirming plans to double the size of the company in the next five years.
Not many people know that LOT was actually the first European customer for the 787 but its recent restructuring has meant that alongside its long-haul network, its fleet has been used on short- and medium-haul routes to the likes of London, Tel Aviv and Tbilisi and charter services too (one aircraft was even wet-leased to Finnair for a short period).
A key part of its development will be the increase in long-haul flying and according to Mikosz up to two additional long-haul routes will be added per year over the next five years. These will initially enhance utilisation of its existing Dreamliner fleet but could see further aircraft arriving in the future. LOT currently operates six 787s with two more on order but Mikosz revealed to The HUB that between five and eight additional aircraft could join the fleet in the future as part of a major fleet renewal.
“We are talking to Boeing. We are talking to Airbus. We are talking to Bombardier and of course to Embraer, which is currently heavily present in our fleet, in order to try to work with the OEMs on how and what is best set-up of fleet division between below 150-seater and over 15-seater,” said Mikosz.
You can watch our exclusive video interview with Sebastian Mikosz from World Routes, below, where he provides feedback on the airline’s 787 operations, discusses low-cost carrier competition, highlights developments and increasing mobility in the Polish market, how LOT intends to develop Warsaw Chopin Airport as a transfer hub and the advantages it now has with its fleet renewal.