Polish treasury to recover LOT 787 grounding cost

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Poland's treasury ministry has insisted that flag-carrier LOT must be compensated for the Boeing 787 grounding, during an extensive parliamentary session in which the cost was estimated at $50,000 daily.

Treasury minister Mikolaj Budzanowski, while updating the Sejm on 22 March, suggested the total cost could reach 50 million zloty "or more" - around $15 million - and said this amount "must be returned to the company in the future".

LOT had been planning to "exit the forest" of its financial crisis following the introduction of the 787, he said: "They bring real profitability to this company."

Jaroslaw Zaczek of the Solidarna Polska party, in a response, put the cost of the 787 grounding at $50,000 per day.

The grounding in mid-January came as LOT realised another heavy full-year loss, and Budzanowski stated that, in December 2012, the government was considering whether to rescue LOT or allow it to file for bankruptcy.

Budzanowski acknowledged that the public had a "right to know" about the airline's situation and the rescue effort, which centres on a restructuring programme and includes a 400 million zloty loan.

He explained that 131 measures were being implemented, to save some 150 million zloty, including an initial shedding 385 staff.

"This year will be painful for this company. It will also be painful for all its suppliers. But there is no other choice."

While he said that certain aspects of LOT's situation were "difficult to predict", he nevertheless pointed out that the airline had been unable to "respond adequately" to changing markets and lacked a sensible strategy.

The rising cost of fuel, as well as a weakening of the zloty, had contributed to the crisis, while LOT's fleet - particularly its Embraer regional jets, with their limited capacity - had consequently become economically less efficient.

LOT agreed to acquire over 20 Embraer jets in 2003 and 2007, said Budzanowski, but returning them to lessors would cost the company over 120 million zloty. He also pointed out that LOT spent another 200 million zloty in 2012 relating to the acquisition of the 787s.

Parliamentary member Tadeusz Aziewicz, of the liberal-conservative Civic Platform, responded by saying that LOT's predicament would hamper the search for a private investor, and that rapid privatisation "might not be possible".

"I am fully aware that spending public money on saving a business is a very painful event which always raises questions, both economic and ethical," he added.

During the debate, Ryszard Zbrzyzny of the SLD party highlighted that LOT only owned three aircraft in its fleet of 46 - with even these likely to be sold - while Ruch Palikota member Bartlomiej Bodio described the airline as a "colossus with feet of clay, badly managed, without property, a strategy and even without aircraft".

Other political representatives questioned the wisdom of spending large sums on consultants and the depletion of financial gains raised through the sale of assets, including 450 million zloty from the sale of its landmark hotel in central Warsaw.

Jaroslaw Zaczek expressed concern that the Polish taxpayer could end up contributing 1.5 billion zloty to LOT, pointing out that the carrier is heavily indebted - and fortunate to be state-owned. "If the creditors were private companies," he said, "they would have already applied to the court for bankruptcy."