LOT Invites Takeover Talk With Lufthansa
Jens Flottau/Athens jflottau@freenet.de
LOT Polish Airlines has started exploratory talks with its alliance partner Lufthansa about a possible takeover, LOT's new CEO Sebastian Mikosz told AviationWeek. He and Lufthansa CEO Wolfgang Mayrhuber have met once to discuss possible strategies that could bring LOT under the umbrella of the Lufthansa group.
The Polish government is expected to appoint a privatization advisor for the airline by mid-June and Mikosz hopes that the process will be in an "advanced stage by the end of this year." He admits that LOT's difficult financial situation combined with the effects of the worldwide economic downturn have intensified the pressure on the airline to find a new owner. Under European Union regulations, the Polish government cannot subsidize the airline.
LOT is 68% owned by the state, another 25% formerly owned by Swissair Group is held by a trustee, and 7% is controlled by employees.
"We have a great amount of homework to do," Mikosz told AviationWeek on the sidelines of a Star Alliance event in Athens, Greece. The new CEO has been on the job for only 10 weeks. In his view, LOT needs to improve pricing and network policies and "work on finding a place in the Star Alliance through more integration." LOT is not only suffering from low-fare competitors, but also has a difficult time dealing with alliance-internal competition mainly from Lufthansa.
But closer integration and cooperation is no longer enough for LOT: "Consolidation is going fast and we cannot wait," Mikosz says. Therefore, LOT is trying to build a business model that could see it play a similar role as Lufthansa subsidiary Swiss or Austrian once it is taken over: Brands and management teams are kept along with a given level of autonomy while group-wide synergies are exploited.
The Polish government is expected to keep a 51% stake in the airline in a first step, but would pull out of the company within a two- to three-year time frame, Mikosz said. "We have a clear preference for an industry partner and Lufthansa should obviously be the first partner we turn to." He does not want LOT to be sold to a financial investor because of the continuing role of the airline as a national carrier.
Lufthansa's Vice President of Alliances, Goetz Ahmelmann, says that any deal would have to be beneficial for both sides, but that negotiations are not taking place yet. Lufthansa is already in the process of integrating Brussels and Austrian Airlines awaiting regulatory clearance. It may also be forced to take over BMI along the lines of a 1999 contract, but the terms are currently the subject for a legal battle between majority owner Sir Michael Bishop and Lufthansa. Restructurings of Austrian and BMI in particular may well cost Lufthansa hundreds of millions of euros and the two carriers are not expected to return to profitability any time soon. That burden may make it more difficult for the Polish government to bring Lufthansa in as a strategic partner for LOT.
Photo credit: LOT Polish Airlines
