In the face of the biggest crisis in the history of the aviation industry, the European Commission and the Council of Ministers of the Republic of Poland have approved an aid package for LOT amounting to PLN 2.9 billion. It consists of a PLN 1.8 billion loan and a PLN 1.1 billion of capital injection. Such financing of LOT was possible due to the good condition of the company before the pandemic.
LOT undertook to repay the major part of the aid amount together with subsidised interest rates, to the Polish Development Fund, which provided financing. Optimisation of the carrier’s operations, reduction of leasing costs and the strategy implemented by LOT in recent years have resulted in a significant increase in profitability and the number of passengers carried. Therefore, even in such a serious crisis within the industry, the company can use repayable financing, which will be returned within six years from the profits generated.
– The main cost of the airlines’ operations are the lease payments for aircraft, which are paid to foreign financial institutions. Due to the crisis, we have negotiated a significant reduction so that we can apply for state aid and then work out its repayment as soon as possible – says Rafał Milczarski, CEO of LOT. The airline is a driver for the economy, tourism and a guarantee of the country’s logistical security. Before the pandemic, we had been growing year on year in almost every category and generated record profits. We know how to get back on the path of intensive growth and we will do so – added Rafał Milczarski.
As a result of the pandemic, since mid-March 2020, passenger air traffic throughout Europe has been suspended for almost 3 months, which means billions in losses for each air carrier. The situation was even worse because of the exceptionally bad summer season and the restrictions imposed by European countries at the beginning of autumn. According to IATA forecasts, the aviation industry worldwide net loss will be USD 118 billion in 2020 and USD 38 billion in 2021. Global air traffic has decreased by 66% and it will take several years to recover. That is why the leading European carriers have asked for public aid, otherwise, air traffic would disappear for years. LOT is the next airline in Europe to receive government aid as a result of the pandemic. The airlines operating in our region have received multi-billion support from their governments, some of them even up to the equivalent of PLN 50 billion.
Before the pandemic, LOT was a profitable company, generating profits every year. Since 2016, LOT has doubled its scale of operations, expanded its fleet from 45 to 80 aircraft and launched 80 new routes. In 2019, LOT carried a record 10 million passengers onboard its aircraft. In 2020, LOT planned to launch long-haul flights to Washington and San Francisco and to carry around 12 million passengers.
The fast growth of LOT and the entire aviation sector is of great importance to the Polish economy and labour market. According to the TOR report, LOT contributes to the creation of about 63.7 thousand jobs and about 0.56% of the national GDP (about PLN 12 billion per year), while the entire aviation sector generates about 242 thousand jobs and 2.4% of GDP in Poland.
Warsaw, December 22nd, 2020
State aid: Commission approves €650 million Polish support to LOT in context of coronavirus outbreak