State-owned carrier Lithuanian Airlines is focusing efforts on restructuring its operations as part of a new three-year business plan after the state put privatisation on the backburner.

To help fund restructuring, the carrier is selling off its 50.8% holding in catering firm Aerochef-LAL, its 52% share in tour operator AIP and regional subsidiary Air Lithuanian. Shares in Aerochef and AIP are expected to go to its current partners, while it will seek investors to take 100% in its regional subsidiary.

"Our concern is to have the company working profitably and competitively," says airline chairman Vidus Zvinys. He notes that the airline drove down costs over the past two years and trimmed staff numbers by a third to 720 employees. In 2003 the airline anticipates net profits of LTL2.2 million ($750,000) against revenues of LTL220 million.

Profits from the core business are likely to fall below the 2002 figure of LTL10 million as Lithuanian struggles against increased price competition in Europe. Traffic this year is around 10% up on 2002 when it carried 303,000 passengers. The airline anticipates that the pace of growth will continue through its Vilnius hub at 10% a year, bolstered by the state's accession to the European Union from May 2004. Zvinys says the carrier's slimmer cost base will put it in a better position to compete as it prepares for new entrants into the Lithuanian market.

The new business plan will see limited growth as Lithuanian launches new destinations through codeshare agreements. It will reshape its capacity in 2004 by withdrawing one Saab 2000 and adding two Boeing 737-300s or -500s, leaving it with four 737s and two Saab 2000s. Lithuanian plans to add another 737 each in 2005 and 2006.

It plans to grow its ground handling and maintenance units either independently or possibly with the help of strategic partners.

Zvinys says that the privatisation is likely to be revisited by the state in 2004 with conditions loosened to allow institutional investors and charter airlines to participate. The sale could take place at the earliest in 2005, he adds.

Source: Airline Business