LOT aspires to continue to be the pride of Poles
Zbigniew GAJEWSKI
LOT is a national carrier firmly entrenched in the public awareness of Poles. In the ‘Rzeczpospolita’ daily newspaper’s ranking of the most valuable Polish brands, it climbed to 17th place in 2018, from the bottom of the top 100 a few years earlier. In the Polish Radio ranking 'Lubię, bo polskie’, it was recognised as the best domestic brand of 2023. The company has already emerged from the stage of fighting for survival and is now striving to develop its market position.
.LOT has existed since 1929 and is one of the oldest operating carriers in the world. It operates in the medium-sized airline segment and aspires to a four-star standard. However, the aviation market is now as competitive as ever. LOT has to cope with, among other things, low-cost airlines, various macroeconomic factors and social challenges.
LOT Polish Airlines’ development strategy for 2024-2028 promises to transform the company into an enterprise with greater reach and better financial standing. This is to be achieved by respecting corporate social responsibility standards, including improvement of the service quality. The company wants to strengthen its position in Central and Eastern Europe and in new, previously absent markets such as Azerbaijan, Uzbekistan and Saudi Arabia.
The number of passengers is expected to grow to 16.9 million by 2028, and there are plans to expand the fleet to 110 aircraft (from less than 80 aircraft at the end of 2023). This should translate into a 30 per cent share of the Polish aviation market and the timely repayment of public aid received during the pandemic.
Crisis after crisis
.Before the company’s authorities could present these ambitious plans, they had to struggle with many adversities. In 2012, with over 2,000 employees and almost PLN 3.5 billion in revenue, the company was at risk of losing its liquidity. This was due to the accumulation of a number of unfavourable external factors, including delays in deliveries and operational readiness of the B787 fleet, successive waves of the financial crisis or a significant increase in fuel costs.
The Polish government even considered selling LOT. This did not happen because the weakened company was valued very low. Instead, public aid of PLN 400 million was launched and the company began the legally required process of deep restructuring.
It began to bear fruit in 2014, when the company generated a profit of PLN 99 million from core operations for the first time in seven years. Since then, the company’s situation has improved year on year. In 2016, LOT carried more than 5 million passengers. In the following years, it increased this number to 7 million in 2017, 9 million in 2018 and 10.4 million in 2019.
Dangerous effects of the pandemic
.LOT’s recovery process, however, has been hampered by the pandemic. In 2020, global passenger traffic fell to 34% of 2019 levels, according to IATA. More than 40 airlines collapsed in 2020 alone. This number rose to more than 150 during the three years of the pandemic.
The pandemic caused a very serious crisis also at LOT Polish Airlines as passenger traffic virtually froze. The company again had to resort to state aid, just like other airlines around the world. The recapitalisation from the state budget amounted to EUR 250 million and the loan from the Polish Development Fund to PLN 1.8 billion. LOT used the state aid not only to cover the costs of current operations but also to adapt to the new market conditions.
The company implemented a technological transformation plan launched back in 2019 in the areas of sales, revenue management and passenger service.
The rebound is clear
.In 2022, the national carrier achieved revenues of PLN 8.3 billion. In 2023, sales revenue rose to PLN 10.1 billion and operating profit was PLN 1.1 billion. The reason for this rebound was mainly due to dynamic revenue growth combined with a rational cost policy. With an EBIT margin of 11% in 2023, LOT Polish Airlines was one of the most profitable airlines in Europe. It outperformed carriers such as Lufthansa, Austrian, Eurowings, Air France, KLM and Wizz Air.
As part of its new strategy, LOT is planning a major expansion in the aviation market, aiming to launch 20 additional routes mainly to Asia and North America. This is expected to lead to a gradual increase in passenger numbers to 17 million in 2028, almost seven million more than today. To this end, the company plans to acquire around 40 new aircraft and carry out cabin modernisation of Boeing 787-8 Dreamliners.
Human capital will be an important factor in the implementation of LOT’s strategy. This concerns not only the qualifications of pilots, cabin crew and technical staff but also the working atmosphere, the relationship between management and employees and the arrangement of the pay spines. The resulting internal situation within the company will have a significant impact on the Polish carrier’s development potential.
Operating from Poland which, in the context of the war in Ukraine and the start of the process of European Union enlargement, has found itself at the heart of an integrating Europe, may prove to be LOT’s new competitive advantage.
LOT Polish Airlines wishes to ensure that the company’s market position continues to strengthen and that Poles can continue to be proud of their national carrier.
This publication analyses the assumptions of LOT’s strategy for 2024-28. The authors show the evolution which LOT Polish Airlines has undergone, the current situation of the company and evaluates the possibilities of actual implementation of the plan prepared by the company.
