Treasury confirms LOT IPO on hold
The planned initial public offering (IPO) of LOT Polish Airlines (LOT) looks increasingly unlikely despite past government pledges that the stock market launch is integral to its 2002 privatization program.
Last week, Treasury Minister Wiesław Kaczmarek effectively ruled out the possibility of taking LOT public "in the near future," blaming the financial collapse of LOT's strategic investor, Swissair, and poor global sentiment for airline stock.
The treasury is LOT's majority shareholder with a 68% stake, while the bankrupt carrier Swissair holds 25% and employees have the remaining 7% stake.
Analysts, however, welcomed the decision, saying the carrier's poor financial standing and a pessimistic short-term outlook would be bad timing for an IPO. They also said that LOT should first find a new partner to replace Swissair.
"It's not a good moment for an IPO of an airline now that the global air travel market is experiencing such a severe slump and global carriers are recording a 30-40% fall in demand," said Elżbieta Marciszewska, airline analyst at the Warsaw School of Economics. "Also the financial situation of LOT is poor and those of its partners (Swissair, Sabena) are very poor, so at a moment when the carrier needs help from the government, one cannot say that an IPO is a good solution."
Although Kaczmarek did not explicitly rule out an IPO before the end of 2002, market watchers dismissed the possibility of a stock market launch for the national carrier any time soon.
Rafał Wiatr, head of research at DM Banku Handlowego brokerage house, said the likelihood of LOT's IPO before 2003 is minimal. Tomasz Bardziłowski, analyst at CSFB, agreed. "I don't believe this situation will improve soon to enable an IPO in 2002," he said.
Tadeusz Jarmuziewicz, transport expert of Civic Platform (PO), the biggest opposition party, said the carrier should first find a new investor before seeking a public offering. "LOT should start by seeking a partner," he said. "Then an IPO is possible as a second step." He said a failed IPO would damage LOT's negotiating position while it is looking for an investor. "Possible investors would then use a different language in negotiations," Jarmuziewicz said. However, he supported the idea of a public offering in the long term. "Sooner of later, LOT will land on the stock exchange," he said. "Most airlines in the world are publicly traded."
Meanwhile, Deputy Infrastructure Minister Andrzej Piłat told Reuters last week that Swissair wants to sell its stake in the Polish carrier, and that Lufthansa and British Airways, Europe's biggest airlines, are showing interest in a deal. He said either airline could buy the 25% stake indirectly through some foreign banks operating in Poland, after the financial institutions buy the stake from Swissair.
But Marciszewska was apprehensive about a financial institution buying the stake. "A non-industry buyer can sell the stake as quickly as they bought it, without taking into consideration the airline's interest," she said.
- Barney Berns contributed to this article
Robert Wylot
