ANALYSIS: Embattled LOT struggles to reform

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Poland's government is pressing US representatives for assistance to overcome capacity problems at LOT following the Boeing 787 grounding, while the embattled airline embarks on a strategy to tide its losses.

The 787 was grounded in mid-January, barely a month after LOT initiated commercial services on European routes with its first airframe, forcing LOT to switch back to Boeing 767s.

Poland's treasury minister, Mikolaj Budzanowski, discussed the matter with US ambassador Stephen Mull, seeking a "personal commitment" to address the needs of the carrier following the 787 suspension. The ministry says it has raised both "operational and financial issues", notably the possible temporary provision of replacement aircraft from Boeing.

LOT's 787 misery piles more pressure on the airline whose poor financial situation has been the subject of parliamentary debate.

During a session in the last week of February, former deputy treasury minister Pawel Szalamacha highlighted LOT's failure to make a profit since 2007.

LOT Polish Airlines

Operating profit

Net profit

2011 ($49m) n/a
2010 ($54m) ($15m)
2009 ($71m) ($54m)
2008 ($52m) ($304m)
2007 $34m $59m
2006 ($14m) $172m
2005 $28m $27m

Source: Flightglobal Pro and company reports; operating profits are before exceptional items

Szalamacha said the airline had experienced a "carousel of presidents" - noting that the newly-appointed chief, Sebastian Mikosz, had already taken a turn at running the airline - and been subjected to a run of mistakes and poor decisions.

Treasury undersecretary Rafal Baniak retorted that Mikosz "knows the company from the inside", but acknowledged that the tasks facing him were "very difficult".

"One of them is the painful need to reduce employment," he said, adding that dealing with "overstaffing" is an important part of the LOT recovery plan.

Baniak told parliament that the carrier had introduced a voluntary redundancy programme on 15 January, and that 130 personnel had opted for this.

LOT stepped up the pressure in early February by initiating procedures to terminate employee contracts. Baniak says redundancy will hit around 500 staff.

Job losses are just one part of a "complex process" of restructuring LOT, he added, to enable it to return to profitability - a process which was not solely based on cutting costs.

LOT chief Mikosz says the airline is facing a "particularly difficult" stage, and a "time of necessary changes".

The airline has been examining its network closely as part of the restructuring, not just because of the 787 problems but to concentrate on routes which are profitable and which might be developed further.

It will maintain its transatlantic operations to Chicago, New York and Toronto, noting that these anchor services play a strong role in the transit market across Eastern Europe. For the summer 2013 season it is planning 11 weekly flights to its US destinations. It will also fly thrice-weekly to Beijing.

LOT will increase services to the Georgian capital, Tbilisi, which has "good potential for growth" but is axing several poorly-performing routes - among them Yerevan, Donetsk and Cairo, as well as Krakow-Paris.

"I believe that the decisions we have taken will help LOT survive on the difficult aviation market and become a profitable European carrier," says Mikosz.

"Both the management board and the employees of the airline face a major challenge. But I am convinced that - albeit with some sacrifices - we will make it together."