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 8-Sep-2016 LOT Polish Airlines announced its "2020 profitable growth strategy". This involves a goal to achieve "sustainable viability", after a restructuring programme which returned LOT to operating profit in 2014 after six loss-making years. Its privatisation may even be back on the agenda.
LOT currently ranks behind LCCs Ryanair and Wizz Air by share of traffic in Poland, which offers superior traffic growth potential versus Europe as a whole. The airline aims to increase passenger numbers from 4.3 million in 2015 to 10 million in 2020, growing its fleet from 43 to 70 aircraft. LOT's expansion will focus on long haul, particularly North America and Asia, where it currently has only five routes and where competition is considerably lower than on short/medium haul. Initial plans include the launch of Warsaw-Seoul this winter and a return to Warsaw-New York Newark next summer.
According to data from LOT, its restructuring has left it with a fairly efficient cost base by legacy airline standards and this will be important in competing with LCCs (but there is still a cost gap with LCCs). LOT's growth will focus on long haul but will need short-haul European feed – and partnerships. Although LOT no longer appears to be considering leaving the Star Alliance, it remains excluded from American and Asian JVs. Further, those JVs preclude members from working with LOT. Partnership growth will be as critical as it will be challenging.
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