Better results of LOT Polish Airlines: more optimism, even more challenges

Warsaw, 11 December 2013 – PLN 111 million – by such amount LOT Polish Airlines improved their financial results in core business in the period January-November 2013, as compared to an amount assumed in the Restructuring Plan. Good financial data are an effect of changes consistently implemented by the Company. Recent months are, however, just the beginning of the restructuring process. 2014 will be the most important and difficult year – full of challenges.

According to current forecasts, the Polish carrier will end 2013 with a small operating loss 
of about PLN 20 million. This result is better by about PLN 122 million than assumed in the Restructuring Plan, which provided for PLN 142 million loss at the end of 2013. The third quarter was particularly good: LOT generated profit on its core business at a level of PLN 100.5 million, as compared to PLN 20.0 million in 2012 (an increase by 402 %). Such improvement was possible thanks to consistent implementation of the Restructuring Plan, i.e. reducing costs while generating additional revenue. Thanks to actions taken, current cash situation of the Company is by PLN 162 million better than provided in the Plan.

It is worth noting that an agreement with Boeing, signed on Monday, which resolves 
a dispute relating to the period when LOT Dreamliners did not operate long-distance flights, only slightly affects data for 2013. The major impact of this agreement on the result will be visible only in 2014.

Good results were achieved thanks to savings in fuel consumption, administrative and personnel costs reduction through employment restructuring, as well as tickets distribution costs reduction. Renegotiation of contracts with suppliers also brings effects. On the other hand, additional revenue was generated. LOT Polish Airlines better manage their flight network, transfer opportunities for passengers have been increased, flexibility of offered tariffs has been improved and new tariffs have been introduced. The carrier has launched additional services and expanded distribution channels, inter alia through mobile solutions. Signing of agreements on charters to 8 resorts in the world by B787 Dreamliner was also important.

Dreamliners are now a carrier’s trump card in relation to the competing lines. Thanks to this aircraft, the number of passengers in Business and Premium Class increased by 82 % in the period January-November 2013 (as compared to 2012). What is important, since the introduction of Dreamliners, i.e. from July this year, growth dynamics has exceeded 100 %, which confirms travellers’ confidence in the safety and comfort of this aircraft.

The “load factor” (i.e. seats occupancy in the aircraft) is also satisfactory: it amounted to 77%. So good result was achieved in spite of simultaneous reduction in the number of connections, external operational constraints (Dreamliners grounding for a few months) and during the difficult process of company restructuring. It is worth noting that in the peak season – during the summer months – the load factor for the Dreamliner exceeded 90%.

The ending year is, however, only the beginning of the restructuring process. The future year will be decisive. LOT faces considerable challenges, including the necessity to maintain financial liquidity, market position in the context of increased competition, to receive approval from the European Commission for the Restructuring Plan, to reduce as much as possible the second tranche of public aid, to ensure effective use of the sixth Dreamliner in a situation in which the airline is not able to increase its offer, as well as to seek a strategic investor.

In spite of these challenges, thanks to promising results, LOT postpones once again application for earlier planned second tranche of public aid. In accordance with the Restructuring Plan, it should be paid in August. The company makes every effort to apply for the second tranche as late as possible and to ensure that its amount is as small as possible.

The carrier also expects in the near future some signals from the European Commission regarding the underlying principles of the Restructuring Plan. The plan, submitted by the Ministry of the Treasury to the European Commission on 20 June 2013, provides for several strategic steps for the future of LOT Polish Airlines. Its pillars include modernisation of the fleet and efficient use of aircraft by the carrier, emphasising the dominant role of Dreamliners as the long-distance fleet. At the same time, the company restructuring process is based on a series of sales-oriented initiatives which are aimed to generate savings and additional revenue for LOT.