LOT Polish Airlines in October became the newest member of the Star Alliance, a relationship the carrier's executives say is essential in helping build and strengthen its position in the market.
"We do not see ourselves as an independent, utterly autonomous airline," says Marek Grabarek, LOT's new president. Remaining outside the growing global carrier groupings would "doom us to become of marginal importance and lag behind other airline companies", he adds. Grabarek says the benefits of joining Star are apparent already despite the strenuous work that was necessary to meet the alliance's system requirements.
A restructuring of LOT's hub operations at Warsaw and a substantial cost-reduction programme begun last year helped reverse heavy losses suffered in 2001. The IT and other infrastructure enhancements put in place during the run-up to full Star membership and LOT's initial codeshare and marketing agreements with Star partners Lufthansa and Austrian Airlines have already improved the Polish carrier's outlook.
"We will have a positive year," Grabarek says. A profit in its core airline business in 2003 will contrast sharply with losses of about $162 million in 2001 and $28 million last year.
Grabarek, from the Polish treasury ministry, became acting head of LOT in March after Jan Litwinski resigned in the face of charges that he and other board members had taken "extra salaries" from the former Swissair Group, which had bought into the Polish carrier. Grabarek was named president and chief executive of the state-controlled airline in June.
Marek Serafin, LOT's director network management, says top airline goals are to improve network profitability and to take advantage of the opportunity created by LOT's joining Star and by Poland's accession to the European Union next May. "We believe 10% a year growth is possible," he says. It all depends on the Polish economy, he suggests, and the buying power of the Polish people. "Fewer people in Poland fly than in developed countries," he notes.
A stumbling block to the upbeat outlook could be the US Federal Aviation Administration's downgrading of Poland's safety rating to Category 2 in September under the US international aviation safety assessment (IASA) programme. Grabarek says the Category 2 ranking does not affect LOT's wintertime services to the USA, but could pose a problem for the carrier on the North Atlantic if Poland does not regain a Category 2 ranking before the 2004 summer travel period. Then, LOT would want to increase services from Warsaw and Krakow and begin codesharing on flights of Star partner United Airlines to 29 cities beyond LOT's US gateways.
Grabarek says he is hopeful a new FAA audit - possibly in December - will reinstate the Category 1 rating. Otherwise, "it could be a real problem," he admits. "I don't want to use the word 'disaster'."
Fully 60% of LOT's mainline domestic passengers transfer to its international flights, Serafin says. The airline operates to 48 cities in Europe and beyond and a dozen Polish cities with a fleet of 38 jet aircraft and 13 ATR42/72 turboprops that are flown by its EuroLOT regional subsidiary. "Our prime interest is to feed Warsaw," Serafin says. Traffic for the first nine months of 2003 was up for both domestic and its short-haul European services but remained static on long-haul services.
LOT currently operates a fleet of five Boeing 767-300s on its long-haul routes to North America but has committed to their replacement in 2006. The airline also is interested in replacing its older-generation Boeing 737s. Serafin expects negotiations for new aircraft to begin next year.
Besides its 767s and 737s, LOT also operates 14 Embraer ERJ-145s, and will take delivery of the first of 10 Embraer 170s on firm order in January. It will have five more 170s in its fleet by June, with the remaining four to be delivered in 2005. Serafin says the 170s will be used to start new routes to Venice and Dublin from Warsaw next summer.
LOT is 67.96% owned by the Polish government, 25.1% by receivers of the former Swissair, and 6.94% by LOT employees. At ceremonies to commemorate LOT's joining the Star Alliance, Jorgen Lindegaard, president of Star partner Scandinavian Airlines, reiterated his airline's theoretical interest in the former Swissair stake, suggesting that "Poland is a very interesting country for investment," but remained uncommitted.
Wolfgang Mayrhuber, chairman of Lufthansa, also demurred. "We are in the business of transporting people, not buying airlines," he said. "We would rather spend money on the total network."
Source: Airline Business
