LOT looks to Western Europe for partners

By : Robert Wylot

   Air France and British Airways (BA) appear to be the most likely investors in LOT Polish Airlines following the recent financial problems to hit the carrier’s strategic investor, Swissair, industry analysts told the Business Journal last week.

   “Of the three big European airlines, British Airways and Air France would be most interested in LOT as a partner,” said Matthew Stainer, an airline analyst with Societe Generale.

   Swissair, which holds a 37.6%-stake in LOT, hopes the Swiss government will come to its aid to stave off bankruptcy, leaving LOT and its majority shareholder – the Treasury Ministry – to find a new partner.

   “The Polish government must realize that if LOT doesn’t join a big alliance it may disappear because that’s what the current consolidation is about,” Stainer said. “It’s happening to (Belgium’s) Sabena now.” Stainer said there is no doubt Swissair will have to sell its stake in LOT.

   With all the uncertainty surrounding Swissair, LOT is already talking to other potential partners. “We’re holding talks with several airlines so we can present the Treasury Ministry with concrete proposals at the right moment, but it will be the ministry that will make the final decision,” said Leszek Chorzewski, LOT’s spokesman. “Consolidation in Europe is inevitable,” he said. “Only two to three alliances will remain on the market.”

   This means LOT will have to join one of Europe’s three alliances: the BA-led Oneworld, Lufthansa’s Star Alliance or Air France’s SkyTeam.

   Analysts said a hookup with Lufthansa was least likely. “Lufthansa has a strong presence in Eastern Europe, through its own network and through Austrian Airlines, which is a member of Lufthansa’s Star Alliance,” Stainer said.

   Elżbieta Marciszewska, an air transport analyst at the Warsaw School of Economics, agreed. “I don’t think Lufthansa needs LOT anymore,” she said. “Austrian Airlines has a very strong network in the east, so it’s hard to imagine that Star Alliance will want LOT as a new member because LOT would create internal competition within the alliance.”

   Stainer said Air France and BA are the two carriers that have yet to exploit fully destinations in Central and Eastern Europe. “BA and Air France are underrepresented in Eastern Europe,” he said, adding that the French carrier would be most likely. “Air France is the one that has the money (to buy a stake in LOT), as it has stronger finances than BA. It’s also more desperate for a network, because it has fewer partners than BA.”

   But Marciszewska said Air France will be less interested in LOT than BA. “Air France has recently formed an alliance with Delta Airlines (in the United States) and CSA (Czech Airlines) and it’s unlikely they will be interested in another partner here,” she said.

   Air France’s press attaché in Paris, Brigitte Barrand, would not rule out an alliance with LOT, but she said the carrier has existing partnerships in Eastern Europe. “CSA has an extensive network to and from this area,” Barrand said.

   Marciszewska said BA would be the best choice for LOT. “I think cooperation with British Airways would be a good solution for LOT for several reasons: it’s a strong airline, it’s in a good alliance; its losses are still relatively small in comparison to other airlines, and they have an underdeveloped network in Eastern Europe,” she said.