LOT significantly improves its financial results
16th December 2013
The Polish air carrier this year expects to lose some zł.120 million less than previously expected
Instead of the previously projected zł.142 million loss for 2013, Polish state-owned air carrier LOT now estimates that its net loss should be at zł.20 million, CEO Sebastian Mikosz said while announcing the airline’s latest financial results last week.
The troubled national carrier has been losing money for years now, and earlier in 2013 received some zł.400 million in state aid to avoid bankruptcy. This financial help has been the subject of investigation by the European Commission over whether it was in line with EU competition laws. Mr Mikosz expects to have the decision announced within the next few months.
In order to justify the state aid, the company had to make several concessions. It reduced its employment and the number of planes it uses, also slimming its route network significantly. Furthermore, starting from April 2014, LOT will fly internationally from Warsaw Chopin airport only.
Such cuts have helped save the company money, despite fewer passengers – a drop of five percent – flying so far this year. In January-November 2013, LOT improved its net result on core operations by zł.111 million compared to the plan. The third quarter was especially good, the firm said, as it had a net profit on core operations of zł.100.5 million compared to zł.20 million in Q3 2012.
Mr Mikosz added that the company hopes to become profitable next year and bring zł.71 million in profits for 2014. The rescue plan is supposed to be in force until late 2015. Only after that date will LOT be able to expand its flight network.
Dreamliner compensation
LOT and Boeing have also announced that they have reached a settlement on compensation for the grounding of the carrier’s 787 Dreamliner fleet.
All of the latest Boeing planes were out of service between January and June, with the Polish air carrier estimating that it has lost some zł.100 million due to the grounded planes. Both companies did not reveal the details of the agreement, with LOT CEO Sebastian Mikosz saying only that the deal is satisfactory for both parties. According to various media reports, the Polish airline received about zł.100 million in compensation, which is what it asked for initially.
LOT currently has five Dreamliners, with the sixth scheduled to join the fleet in March. The plane will most likely have to be leased out as the reduction in routes means the Polish air carrier will have no use for it.
Still in need
However, despite an improvement in financial results, the company will still need additional help from the treasury. Mr Mikosz said that the company is postponing such a decision so that the aid will be as small as possible, but with the worst months for air travel – January and February – fast approaching, it likely won’t be able to avoid it. According to its rescue plan, LOT was supposed to receive an additional zł.380 million from the state, but Mr Mikosz maintains that it won’t need that much.
Jacek Ciesnowski
From Warsaw Business Journal
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