European Commission opened (06-Nov-2013) an "in-depth" investigation into whether a PLN804 million (EUR192.6 million) payment in restructuring aid made by the Polish government to LOT Polish Airlines complies with European Union state aid rules. The Commission temporarily approved a EUR100 million rescue loan for the carrier in May-2013. Poland notified the Commission of the PLN804 million payment on 20-Jun-2013, which was made to assist the carrier's two and half year restructuring programme. The Commission stated it "will examine in particular whether the planned aid will enable LOT to become viable without continued public funding and whether the company offers adequate compensation to alleviate the distortion of competition caused by the state support. The Commission will also verify if LOT sufficiently contributes to the cost of restructuring." The Commission also express concern "that the forecasts on long-term viability may not be realistic and that the proposed capacity reduction may not be adequate to compensate for the distortions of competition. The Commission also has doubts whether LOT's own contribution to the restructuring cost is sufficient." The investigation will also consider whether LOT is eligible for restructuring aid "in view of potential aid the company may have previously received from the state-owned airports in Poland when it was already in difficulties." [more - original PR]
European Commission opens investigation into LOT Polish Airlines restructuring payment
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On short/medium haul, competition from LCCs Ryanair and Wizz Air is intense. Both have more seat capacity in Poland than LOT, whose new unbundled fare structure reflects the need to adopt some of their tactics. Long haul, where there is far less competition for LOT, is set to remain its strategic growth priority.
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