A proposed change in Polish state ownership law could further delay a vital capital injection for cash-starved LOT Polish Airlines, just as the Polish government lines up potential investors.
The Polish government was due to shortlist consortium bidders for LOT in April and declare a winner by the end of the month, paving the way for a vital recapitalisation programme, restructuring and eventual privatisation of Poland's ailing airline. The bids include exact privatisation timetables as well as a detailed restructuring plan.
The Polish Treasury Ministry is, however, considering a relaxation in LOT's state ownership law, which currently dictates that 51 per cent of the airline must remain in state hands. A change in the law could delay the privatisation by several months.
While the exact timetable remains in doubt, privatisation is seen as as inevitable. 'The only question now is how soon and by what method the airline will be privatised,' says LOT's director of privatisation, Zbigniew Kiszczak. Rules on the Warsaw stock market prevent a company from being listed without a three-year profit record so, in view of LOT's financial history, a public offering is unlikely at this stage. LOT lost around US$3 million in 1996 and expects to report a worse result for 1997.
Instead privatisation is likely to consist of either a direct sale to another airline or to institutional investors. LOT's codesharing agreement with British Airways, which was signed in January, has fuelled speculation of BA interest in taking an equity stake. But both BA and LOT deny any such move. 'A takeover has not been seriously discussed,' says Kiszczak. The experience of Hungarian carrier Malev, which was forced to find a new owner for Alitalia's 30 per cent stake at the end of last year, has discouraged LOT from finding a strategic western European investor. In December, Alitalia was forced to sell its 30 per cent stake in Malev to the Air Invest bank consortium after the European Commission made the divestiture a condition of Alitalia's US$1.6 billion state aid handout. 'Airlines in general are not in the mood for this sort of deal at the moment,' continues Kiszczak, adding that after the Malev experience LOT is very cautious.
The Polish government is eager to keep western European competition away from LOT while the airline gears up to privatisation. 'The Commission cannot deny east European airlines the chance to get ready. If you are a Saturday jogger and you are put into a race with an Olympic athlete, there is no competition,' says Kiszczak.
'We are not postponing competition but we need more time to get ready. We have got to put this into realistic terms. If there was an open sky policy in Poland, we would be swamped,' says Kiszczak.
Source: Airline Business
