SAS eyes up LOT
By Kamil Tchorek
Joergen Lindegaard, the president of SAS Scandinavian Airlines, has expressed his ambition to take over LOT Polish Airlines.
The announcement came at the same time that SAS expressed interest in another acquisition, that of Lithuanian Air. SAS has also begun the purchase of a 49 percent stake in Estonian Airlines worth $22 million.
LOT's numbers have been a market anomaly this year, with profits well above the industry average. Though 68 percent of LOT is retained by the State Treasury, about 25 percent of shares belong to SR Group, the receiver of bankrupt Swissair's shares, who has until now been eagerly awaiting a buyer.
"Scandinavian is not making an excellent profit, and one way of turning that around is by expanding into profit-making operations," says Karl Goiran Karlsson, General Manager of SAS (Poland).
According to LOT, the purchase should not affect Polish Airlines' business excessively. "Every investor into the airline business is thinking about the positive," says Robert Chorzewski, spokesman for LOT Polish airlines. "Even though we are making a better return than SAS at the moment, their - as yet theoretical - involvement with us would not be a threat. In fact, LOT will be joining SAS in the Star Alliance later this month, and we will start cooperating with them at a partnership level."
The Star Alliance group is the largest alliance of air carriers in the world, with around 900 destinations covered by the organization. "It is a big opportunity for us," says Chorzewski of LOT, "...we will be able to move our trans-Atlantic agreement from American Airlines to United. For at least another two or three years, we will be the only international carrier servicing a direct route between Poland and the US. With a population of nearly forty million in this country, we can see why Scandinavian may be interested in us."
Air industry analysts point out that the flag carriers will not be able to go it alone as niche operations, and will need to combine, as markets merge and globalization accelerates. Yet the onset of the low budget airlines is not, at least in public, seen as a major threat by SAS or LOT. "Low budget lines are better for all of us," continues Karlsson, "...they have a different product, and service a different market."
Still, SAS sees expansion into the currently high-priced Central European market as its main route to success. "Poland's entry to the EU will bring multinationals into the big cities, and the traffic to and from foreign cities will mushroom," says SAS's Karlsson. "And it's already happening now: from the end of this month we're increasing frequency between Copenhagen and Poznań to twice a day, as well as increasing the capacity between Warsaw and Copenhagen. Next summer we must expand even further in terms of frequency."
The Swiss receiver's representative Rutger Schimmelpennick has announced that the 25 percent portion of previously Swissair shares will go on sale at the start of next year, and the SAS announcement is a signal to market watchers that the race has begun. By contrast, the State Treasury indicates that the sell-off of its 68 percent of this remarkably profitable state asset will not take place within the next few years.
