SEPTEMBER 8TH, 2016
LOT Plans Further Growth - New Aircraft And New Connections Next Year
Warsaw, 8 September 2016 – LOT presented its 2020 profitable growth strategy. During that time the carrier plans to achieve sustainable viability and become a leading airline in Poland and Central and Eastern Europe servicing over 10 million passengers per year, gradually increasing its fleet and launching new flights.
LOT’s strategy is based on five pillars: taking advantage of potential that lies in a growing market, developing a network of connections and a hub, competition, boosting effectiveness and building a committed team.
“Taking maximal advantage of the fact that the market of air services in Poland and the Central and Eastern Europe is bound to grow at a much quicker pace than in other European countries is a starting point for our plan of further growth. We have estimated that in Poland alone the number of passengers is going to grow at about 5% per year. It is a huge opportunity for us,” says Rafał Milczarski, LOT’s CEO.
LOT is going to regain its lost market share in Poland, aiming for approx. 25%. It means that the number of its passengers as early as in 2020 is going to exceed 10m vis-a-vis 4.3m in 2015. Hence the airlines have announced that they are going to continue to develop their network of connections with long-haul flights being its most important element.
“Long-distance flights are the most profitable part of our business and being the only airlines in the region, LOT has the related growth potential. We are mostly going to focus on developing flights to North America and most important business centers in Asia. Connections to Central Asia and to the Middle East are particularly interesting from our perspective. Warsaw’s geographical location allows to develop an unmatched offering of flights to countries such as Kazakhstan or Iran. We are going to take advantage of that potential,” adds Rafał Milczarski.
In just a few weeks LOT is going to launch a direct flight to Seoul and next year another connection to Newark in the USA is scheduled to be opened. Flights to the NYC’s second airport will be initially operated 4 and then 5 times a week, starting from the beginning of the 2017 summer season.
“We are happy to return to Newark because it is an important connection to the Polish community. Newark is also an important interchange for passengers who continue their travel to other destinations in the United States and it simply extends our offering,” says Rafał Milczarski.
Soon LOT is going to announce more new destinations. LOT’s CEO points out that as the network of connections keeps developing, the carrier’s Warsaw hub must keep pace as well. Ensuring the shortest and most convenient transfers is one of key conditions underlying the strategy’s implementation.
“As new long-distance flights are launched, the number of short-distance flights, especially from the Central and Eastern Europe, is going to go up as well. We assume that the percentage of transfer passengers, that is, those who change planes in Warsaw, is going to approximate 50% in 2020. Being our hub, the airport must keep up with our development, that is, ensure appropriate infrastructure and capacity. It is a huge challenge for the Warsaw Chopin Airport which in 2020 is going to reach its capacity limits. In the years to come LOT is going to continue with developing its hub at the Warsaw Chopin Airport but ultimately its offering will have to be transferred to another, centrally located airport in Poland,” says LOT’s CEO.
A convenient timetable of flights is not the only competitive edge LOT enjoys. The Polish carrier is going to compete on the market offering the best value for money. LOT has been planning more customized promotions and working on developing additional products and services.
“LOT will no longer be perceived as expensive airlines. Travelling with LOT Polish Airlines can be inexpensive, plus we are capable of going beyond what other low-budget airlines can ensure, namely, for example, free checked baggage or free meals on board,” says Rafał Milczarski. “Competition requires us to build a strong sales structure on all markets on which we are present. We are going to strengthen our co-operation with travel agents who are the backbone of our sales operations in the corporate sector and on the other hand we want to increase the footprint and sales via our lot.com Website which is intended to be the source of best deals for passengers who are most sensitive to price,” adds LOT CEO.
LOT intends to measure customer satisfaction with its services on a regular basis. That ratio is one of the elements that help monitor the strategy’s implementation.
To improve its product portfolio and develop its network of connections LOT will need a strong and efficient fleet. The company estimates that in 2020 it will operate a total of approximately 70 aircraft, including 16 Dreamliners and approximately 15 new single-aisle planes with 150-plus seating capacity.
“LOT is able to develop its fleet on its own thanks to operating leases in that way significantly reducing a burden on the company’s finances and improving availability and delivery time for the planes. In 2017 the first few single-aisle aircrafts are going to be added to our fleet. We are in the final phase of negotiations. We also expect the delivery of two new Boeing 787 Dreamliners. We are going to simplify and standardize our target fleet,” says Rafał Milczarski.
One of key factors allowing LOT to achieve sustainable viability involves steadily increasing the company’s effectiveness in all areas of its operations. Today LOT is one of the most effective airlines in Europe in terms of costs. However, its cost effectiveness ratio is planned to improve to reach 5.5 USc/ASK vis-a-vis the present level of 6.51 USc/ASK. LOT will also ensure the highest possible operational reliability. Its goal is to maintain service regularity at 99% and punctuality at 87%. Thanks to that, it will be among the most punctual airlines in the world.
Apart from developing the scale of its operations LOT is going to invest in the development of its team. Until 2020 it plans to hire approx. 400 new pilots and over 1,000 new on-board crew members.
“That entails working out a market remuneration mechanism and motivating people who work with us. We will be placing large emphasis on building a mature corporate culture, developing clear and transparent career paths and talent management, at the same time maintaining an intensive, open dialogue with trade unions operating in our company,” says Milczarski.
LOT has already begun the implementation of its profitable growth strategy. Early this year 23 new flights have been launched, including a long-distance one to Tokyo. It has also significantly improved its financial performance. In June the company started to make money on its air services with a net profit on ordinary activities.