CEO Makes Case For LOT’s Rebirth

By Jens Flottau
Source: Aviation Week & Space Technology
June 24, 2013
Credit: Boeing

When Sebastian Mikosz resigned as CEO of LOT Polish Airlines almost three years ago, the airline appeared to be beyond rescue. Mikosz was fed up with politicians and union leaders interfering in what he believed was a necessary deep restructuring. But now he is back and not only plans to turn around the airline, but finally to sell it.

“I wanted to finish the job,” says Mikosz, who has been an investment banker since leaving LOT. He was brought back by Prime Minister Donald Tusk because the government became impatient with the airline and its never-ending losses. Poland is prepared to help out one last time but has also made clear that this time it is serious in preparing for its eventual exit.

Poland has been trying to privatize LOT for more than a decade, but potential investors have been less than enthusiastic not only because of the airline's poor state, but because the government wanted to retain effective control. “The privatization case has not been very compelling,” says Mikosz. That has now changed, as a new law allowing private majority ownership in LOT will take effect this week. Whoever wants to buy the airline will be able to make and implement decisions.

But an eventual sale depends on a lot of factors. Most importantly, Poland is seeking permission from the European Commission for a $300 million rescue package for LOT. The government already issued an emergency $125 million loan last December to keep the airline flying. That opened up the door for Mikosz a second time. Poland was looking for someone to resolve the LOT situation once and for all.

A lot of the ground work is underway. Mikosz is implementing a severe cost- and capacity-cutting program that eliminates almost 1,000 jobs at the airline and reduces available seat kilometers (ASK) by 20%. LOT is retiring sub-fleets such as the Embraer ERJ 145 or the Embraer 170 that are both regarded as too small. A Polish newspaper reports that LOT plans to lease out two of its eight incoming Boeing 787s, although the airline has not confirmed that.

The 787s play a key role in LOT's restructuring by allowing the airline to reduce unit costs in the long-haul segment, which is important because of the intense yield pressure it faces on short-haul routes. LOT is replacing its aging Boeing 767s as the 787s are delivered. Three have arrived and two more are due by the end of August.

Mikosz is convinced that there is enough demand to fill the long-haul fleet. He points out that Warsaw is expected to double in size over the next 10 years and Polish air travel to triple over the next 20 years, as more and more people can afford it.

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