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LOT Polish Airlines to downsize

Originally published on businesstraveller.com 06/01/2013 - Filed under: Home » News »

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Poland’s LOT is the latest airline of the former Eastern Europe to run into financial difficulties. It means that LOT will cut staff numbers by 30 per cent and reduce the number of planes in its fleet from 40 to 25.

Just before Christmas last year, the Polish government (which owns 93 per cent of LOT) granted the carrier an emergency loan of US$127 million in order to keep operating.

And now, according to The Wall Street Journal (Europe) if the EU rules that the loan is a form of illegal state aid distorting competition then LOT would be forced to hand back the money and file for bankruptcy.

LOT has made a loss every year since 2010. It was thought the carrier had turned the corner this year. But passenger numbers fell by 20 per cent in the past quarter so LOT will end 2012 with a deficit of US$63.7.

Last Friday LOT agreed to slim down its fleet and to concentrate only on flying its most economical planes over its most lucrative routes.

It means that LOT’s older and less fuel-efficient planes will be retired from service and secondary destinations will be axed.

It should not affect services between Poland, the UK and North America because of the strong cultural and trade links which exist between these countries.

These developments come at the time when LOT was basking in the glow of positive publicity. It has begun taking delivery of eight B787 Dreamliners with the first planes set to inaugurate transatlantic service from Warsaw to Chicago in mid January (see online news November 15, 2012).

The new B787s with fresher interiors and fully lie-flat beds in business class (LOT does not offer a first class cabin) will enable LOT to ‘up its game’ on the transatlantic routes which, until now, have been flown by its elderly B767s.

Airlines of the former Eastern Europe have not adapted well to the modern aviation age. Malev of Hungary ceased operations last year (leaving that country with no national airline at all), Czech Airlines of the Czech Republic is facing financial hardship while Slovakia’s Skyeurope failed ages ago.

They face competition from carriers like Air France, British Airways, KLM and Lufthansa on long routes while, closer to home, the budget airlines have captured most of their traffic.

For more information visit lot.com.

Report by Alex McWhirter

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COMMENTS » 

MartinJ - 07/01/2013 14:49

I don't think it's fair to infer from three examples that "airlines of the former Eastern Europe have not adapted well to the modern aviation age". If you buy that you could also argue that Western European airlines have not adapted well as illustrated by the bankcruptcy or ill financial health of bmi, Spanair, Alitalia, Iberia, SAS, and so on.

BusinessTraveller - 07/01/2013 15:39

Thank you for the comments. Although Sky Europe was founded in 2001 (with funding from the EBRD) and Malev was founded fairly recently in 1946, both Czech Airlines (CSA) and LOT have illustrious histories. CSA dates back to 1923 while LOT was founded in 1929.

Their problems started after the fall of Communism. Since then none of these three former Eastern European Countries (Poland, the Czech Republic and Slovakia) has been able to operate a financially successful national airline.

The passenger traffic is there for the taking (just look at how many Polish citizens, who regularly travel home to see friends and family, are working in Western Europe) but they haven't capitalised on it. Perhaps management is to blame. It can't have helped that LOT has employed 10 different CEOs in the space of 12 years while Malev employed around 18 CEOs in the space of 20 years or so.

Alex McWhirter

travelsforfun - 10/01/2013 23:02

I'd agree that the phrase "airlines of the former Eastern Europe have not adapted well to the modern aviation age" risks misunderstanding. I'd suggest it's a problem common to a number of flag carriers of small European countries - who have been hit hard on shorthaul routes by leaner low-cost carriers - but don't have the critical mass to compete in longhaul with the major hub carriers (Lufthansa, British Airways...).

The result is they've been squeezed - and this applies to the legacy carriers of small countries across Europe - whether CSA, LOT, Malev, SAS, Aer Lingus, Air Malta... The notable exceptions are those who've built up a particularly strong longhaul niche - such as Finnair (Far East) or Brussels Airlines (Francophone Africa).

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