In a bid to stem both financial losses and the erosion of market share by western European carriers, LOTis set to retaliate with the long-awaited launch of a new regional and domestic subsidiary, Eurolot.

The wholly owned subsidiary, set up in December 1996, is due to start operations this March. Eurolot will take over LOT's regional services to Tallinn, Riga, Vilnius, Minsk, Lvov, Vienna, Stuttgart, Hanover, Cologne and Copenhagen. The regional subsidiary will also take over all of LOT's domestic routes and introduce new services to Rzeszow and either Slupsk or Bydgoszcz.

Mariusz Tazbir, vice president commercial at Eurolot, says the wholly owned subsidiary is a direct response to the fierce foreign competition in Poland. 'Eurolot will allow us to compete on a reciprocal basis against foreign carriers, particularly German airlines.'

Eurolot is also intended to lower LOT's costs, explains Tazbir. Most of the Polish carrier's regional and domestic services are unprofitable. The low-cost subsidiary aims to increase productivity levels by hiring staff from outside the airline, presumably under different contracts - LOT employees' labour conditions are well protected by strong unions. Tazbir refuses to be drawn on how much higher the productivity levels will be at Eurolot but says the subsidiary will employ a mere 210 staff and will contract out technical services, such as handling, to the mainline carrier. Eurolot will cater for the business class passenger, but will also offer special fares in an attempt to stimulate the small Polish leisure market, which has been neglected by LOT in the past.

The airline will initially wet-lease two 19-seater aircraft - 'probably Jetstream 31s', says Tazbir - and is currently evaluating 30-35 seater turboprops from four manufacturers. The smaller aircraft are intended to replace the current turboprop fleet of eight ATR72s. Tazbir says the smaller turboprops are needed for the lower density routes but refuses to comment on whether the carrier plans to dispose of its ATRs. Tazbir maintains that the ATR72s 'are still okay for some of the domestic routes.'

LOT management has previously talked of plans to convert the eight aircraft to an all- cargo configuration in order to dedicate the large turboprops to an overnight parcel delivery service.


Source: Airline Business