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LOT Polish Airlines wants to double in size in the next 5 years

LOT Polish Airways (Warsaw) has big plans. The carrier wants to double in size in the next five years.

The airline last week announced it would add long-haul routes to Bangkok, Seoul and Tokyo. LOT will also launch more than a dozen European connections, thus expanding its hub and providing convenient transfer flights to passengers from such cities as Ljubljana, Zurich, Cluj-Napoca and Nice.

The first long-haul route to be launched will be Tokyo – it will also be the first direct connection from Poland and New Europe to Japan. The first flight is scheduled for  January 13, 2016 as previously report. The next connections – to Bangkok and Seoul – will start in autumn 2016.

The carrier is also starting routes between January and March 2016. LOT Polish will operate the Warsaw – Dusseldorf route starting on January 1, 2016 with two daily Embraer 175 flights.

Warsaw – Zurich will be started on January 1, 2016 with two daily Embraer 170 flights.

The following day the Warsaw – Barcelona route will commence with four weekly Embraer 195 flights.

Additionally the carrier will restart Warsaw – Cluj (January 2, 2016), Warsaw – Venice (January 23, 2016), Warsaw – Athens (March 2, 2016), Warsaw – Ljubljana (March 2, 2016), Warsaw – Beirut (March 30, 2016) and Warsaw – Nice (March 30, 2016).

The airline outlined its plans as it hosted the Star Alliance meeting:

In next five years LOT plans to be twice as big an airline as it is now. Wants to carry 10 million passengers a year, which is more than twice as much as now. LOT plans to have also almost twice as big a fleet as currently and 60% more operations. The company has presented its strategic objectives and development plans for 2016-2020. It has announced opening five new long-haul connections next year. Three new connections to Asia – Tokyo, Seoul and Bangkok and more than dozen European connections have just been announced. Other new routes will be known this autumn. This is the first such dynamic growth in the company’s history. LOT intends to compete for leadership in the region, becoming the largest network carrier in New Europe.

LOT wants to connect New Europe with the world and become the most international Polish brand. Instead of defending the position of an ethnic carrier in its market, LOT wants to start competing actively for market share in Europe.

We have all the assets to become a regional leader. We already have a strong position in relation to other network carriers in New Europe and access to the largest regional market, which will grow intensively. Our Warsaw hub is perfectly located, efficient and is the largest one in this part of Europe. We are successfully ending our restructuring process, historically we are already the main airline flying from this region to North America, and the 86-year history translates into a relatively high brand recognition. These are just a few arguments that back our position” – says Sebastian Mikosz, CEO of LOT Polish Airlines. Development is the company’s goal and task is to take advantage of the market potential and the projected growth. “This is a perfect moment for us. The population of the New Europe region is more than 175 million people. Its economic growth rate is more than four times higher than in the Euro zone countries. The number of passengers per one inhabitant is growing much faster than in countries of Old Europe, and at the time it is still five times lower than in the EUexplains Sebastian Mikosz.

LOT’s strategic objectives are based on five key elements. The first one are long-haul flights, which the company intends to develop consistently. Even now routes operated by the Dreamliner are the most profitable part of the business, and LOT is the only airline that flies, on a larger scale, convenient, on regular connections from New Europe to the USA, Canada, and China. “This will be a driving force of our growth, which will entail the rest of the network. In the long-haul flights area we have the lowest competition in the region. We have one of the youngest fleets in Europe and we are the only airline to operate all its long-haul connections with the most advanced aircraft in the world, the Boeing 787 Dreamliner. Not only Polish passengers appreciate this fact” – assures Sebastian Mikosz.

The second element is the Warsaw hub. LOT will be a hub & spoke carrier, consistently developing its offer of quick and convenient connections via Warsaw. “We have already increased our transfer capabilities by 40%. Together with the Chopin Airport we have a potential to consolidate fragmented markets of New Europe and to provide it with a leading transfer hub for intercontinental connection” – assumes LOT’s CEO. Convenient geographical location is not the main advantage. The most important argument for passengers is the minimum connecting time – 35-45 minutes, which is one of the shortest in Europe. It is supported by modern, spacious terminal, proximity to major Warsaw business and office centres and to the city centre. All of this comes with the airport’s potential of servicing more than 20 million passengers per year (currently 10 million).

The third element is growth. In 2020 LOT wants to carry more than 10 million passengers a year, that is more than twice as many as today, to perform more than one hundred thousand operations per year (currently over 68,000) and to fly to around 75-80 destinations (currently 49). It intends to regain the lost market share in Poland approximately to the level of 30% and get close to 10% market share in New Europe. This should result in an increase in revenues to about PLN 9 billion (currently less than PLN 3.5 billion) with constantly improving margins, which already puts LOT above average among European network carriers.

“We need to focus on building the effect of scale. Insufficient scale of operations is currently LOT’s biggest problem. There is absolutely no reason why in five years’ time we should not become an airline of a size comparable to Austrian Airlines, Finnair, TAP or Air Lingus. We operate in a fast growing market and, without development, our market share will be rapidly declining. Without expanding the network we will be very susceptible to pressure from the competitionexplains LOT’s CEO. Apart from competition it is a question of company’s performance and its role in the industry. “Only with real potential to consolidate the regional market LOT may become an attractive partner for wider cooperation within alliances or joint ventures. Development is also crucial in the context of potential privatization, for which LOT is getting readysays Sebastian Mikosz.

The value chain is the fourth extremely important element. “In our industry customer satisfaction consists of many elements, which are being performed by our partners or sub-contractors and not the airline alone. The airport and relevant services are responsible for airport procedures, and the handling agent (also a separate entity) is responsible for check-in, collection of luggage and its transport to the aircraft and then to the conveyor belt. We want to cooperate and monitor the entire chain more closely. We expect that our suppliers will develop together with us and also raise the level of quality of their services. Only by doing so we can ensure LOT’s development in passenger services” – explains Ewa Kołowiecka, Chief Operations Officer.

The fifth key element is a committed team. “LOT also means a lot of people for whom this is not just a job but primarily a passion. But we have to continue changing as an organization – this process is already under way but we need a substantial transformation of our corporate culture. We are determined to build a coherent system of staff development to ensure that LOT will become a modern and dynamically growing airline” – adds Monika Kiełtyka-Michna, Member of the Management Board responsible for Corporate Matters.

Presenting its main strategic objectives, LOT also presented the network development plans. Carrier announced  opening five new long-haul connections in 2016. Three of them – Tokyo, Bangkok and Seoul have just been announced. Others will be announced this autumn. After opening five new destinations LOT will more than double its network of long-haul connections compared to the present one as soon as next year. As regards new European connections, three new short-haul routes have already appeared in the booking systems: Venice, Cluj-Napoca and Ljubljana. LOT is also coming back to some routes, which it had to suspend as part of the final pool of compensatory measures required by the European Commission in return for the state aid. These are Athens, Barcelona, Nice, Zurich and Beirut. Starting from January 2016 flights to Belgrade, Düsseldorf, Yerevan, Chisinau, Zagreb and Gdansk – Cracow, which were suspended since July of this year as part of the final pool of compensatory measures required by the European Commission, will be restored as well.

LOT emphasizes that it is able to implement the first phase of the development of the connections network entirely by using its present fleet. New fleet will be needed in subsequent phases. We want to have at least 70-80 new aircrafts by 2020. “Of course, further intensive development will require more resources. For this purpose the company must acquire an investor. This is the best time to do it. The financial situation is stable. LOT is on the final stretch to a successful closure of the restructuring process. For the first time in seven years, LOT ended the preceding year with a profit on core business, that is flying, amounting to more than 99 million zloty” – emphasizes Maciej Dziudzik, Member of the Management Board responsible for Financial Matters.

Thanks to an attractive schedule and high customer service standards LOT wants to make travel for a wide range of customers, even those most demanding ones, as pleasant as possible. With a rich range of classes, fares, products and additional services we want to enable passengers to freely compose their travel of the individually chosen elements. “On one hand, we are already constantly improving our complex offer for demanding business passengers, while, on the other hand, we are creating new travel opportunities for persons for whom low price is crucial. We are changing and improving our quality throughout the process of the so-called customer journey. We want to accompany our passengers and be the host of their journey right from the thought about it, then by seeking an attractive offer, sales and distribution, services before the flight, on-board product and services after the flight. We intend, for example, to further develop mobile applications and our own on-line sales channels to make it easier for customers to use our services, to introduce tools that allow for personalized offers and promotions, and to systematically monitor the level of customer satisfaction. At the turn of the year we plan to refresh the interior of Boeing 737 and to gradually introduce in all Boeing planes, including Dreamliners, elements of new design and new colour scheme for each class of travel. As a result, the aircraft interiors will look more modern and friendly. New colours and markings will significantly improve travel, helping passengers find their way at the airport, go through it and take a comfortable seat on the plane. We want to be a consciously chosen carrier of the region – summarizes Marcin Celejewski, Member of the Management Board responsible for Trade Issues.

Presenting its strategic objectives and development plans, LOT presented its re-defined mission: “We are proud to connect New Europe with the World. We take care of our passengers, being full of positive energy, mindful of Polish tradition and hospitality. Thanks to the passion and professionalism of the whole team we are developing, creating a profitable airline. Together we are building the most international Polish brand.”

Copyright Photo: SPA/AirlinersGallery.com. The Embraer E-Jets will lead the expansion on the European routes. LOT Polish Airlines Embraer ERJ 190-200LR (ERJ 195) SP-LNA (msn 19000415)  departs from London (Heathrow).

LOT Polish aircraft slide show: AG Airline Slide Show

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LOT Polish Airlines will not seek any more public aid, will drop underperforming destinations during the winter season

LOT Polish Airlines (Warsaw) will not apply in September to the Treasury for payment of the second tranche of public aid. According to the airline, this is possible thanks to the promising results of the Restructuring Plan consistently implemented in the Company. At the same time LOT is introducing the flight schedule for the winter season 2013/2014 to its reservation systems. A new network is in line with the Restructuring Plan submitted by the Ministry of the Treasury to the European Commission. It is also a result of necessary compensation required by the European Commission.

The first tranche of aid for LOT was paid in December of last year. Disbursement of the second – in accordance with the Restructuring Plan submitted by the Ministry of the Treasury to the European Commission – was planned for August this year. Meanwhile, the Company has not applied for the second tranche in August and will not apply for it in September. An amount of the second tranche will be carefully assessed when the Company will apply to the Treasury for its payment. Perhaps this will happen only in October.

According to its underlying principles, the Company will achieve sustained profitability starting from 2015.

Consistently implemented restructuring measures include, among others, the network of destinations for the winter season. These changes are in line with the objectives of the Restructuring Plan submitted in June by the Ministry of Treasury to the European Commission. They are also a result of necessary compensation required by the European Commission. Within planned changes, destinations from Warsaw to Bydgoszcz, Rome and Stuttgart will be suspended from the beginning of the winter season 2013. In the coming months, passengers will also not find in the network flights to Beirut, Cairo and Nice, which are seasonal destinations. At the same time, like last winter, flights with the aircraft staying overnight from Warsaw to Stockholm will be suspended. This means two, not three flights a day to the Swedish capital.

The Polish carrier also decided to suspend flights from Warsaw to Zurich, Helsinki and Dusseldorf. These destinations did not generate enough transfer traffic for other LOT flights from Warsaw, especially the long haul which are key to the company’s long-term strategy.

Since, in accordance with assumptions, LOT focuses on expansion of its hub in Warsaw, there will be also less flights from Polish regional airports. In winter 2013, LOT aircrafts will not fly from Cracow to Frankfurt, from Poznan to Munich and from Katowice to Munich.

At the same time, flights from Warsaw to Yerevan, Athens and Belgrade will be unchanged in the coming winter season. Belgrade, one of the strongest destinations in the network of the Polish carrier, will continue to support the flow of transit passengers in their further travel to North America or other European ports. And Athens will remain in the flight schedule due to Greek Presidency of the European Union, which will begin on  January 1, 2014.

Copyright Photo: TMK Photography. LOT Polish has been gradually replacing its older Boeing 737 fleet with newer Embraer E-Jets. The remaining 737-400s are likely to be retired this winter with this schedule reduction. Boeing 737-45D SP-LLF (msn 28752) approaches Belgium for landing in the updated 2011 livery.

LOT Polish Airlines: AG Slide Show