Poland launches another bid to sell airline LOT

By bne IntelliNews April 3, 2013

bne -

The Polish government launched a new push to offload flag carrier LOT Polish Airlines on April 2, as it proposed new legislation to allow the state to reduce its stake in the "bottomless pit" below a majority.

The Treasury Ministry, which currently holds 93% of the troubled airline, is required by law to maintain at least a 51% stake. Warsaw is now ready to ask parliament to approve a move to break that restriction as it looks to offload an airline which is costing it huge piles of cash and no little black PR despite several attempts to restructure. The cabinet adopted a draft that invalidates the law, reports the Wall Street Journal, a move which the company has said was required for privatization to go ahead. The government enjoys the backing of a stable majority in both houses of parliament.

"There is no doubt that if we don't want to keep funnelling public funds into this bottomless pit, privatisation remains the only realistic option," Prime Minister Donald Tusk told a press conference. The government had hoped LOT would finally be back in the black in 2012, but instead was forced to hand over yet another rescue package in December.

In a statement, Treasury Minister Mikolaj Budzanowski expressed hope that once the legislation is approved, Warsaw will finally be able to sell the flag carrier. "Now, when buying the firm, an investor will be able to decide its future on their own," he said according to AFP. The official added that the government wants LOT to maintain its brand and its hub in Warsaw.

The government pointed to Austrian Airlines, sold in 2009 to Lufthansa, as an example of a successful sale of an airline teetering on the brink of bankruptcy. LOT's recently-appointed CEO Sebastian Mikosz said in February he wants to complete a sale to a private investor this year, adding that an EU-based company is "the most natural" buyer.

However, with the impact of the ongoing crisis and high fuel prices, many European airlines are struggling and hoping to find an investor. Few of the mooted suitors are from close to home. Rather, its those from the Middle East and Asia's fitter economies, looking for a European hub to fill in a blank in their networks, that are the more likely buyers.

In other words, the problem for LOT appears less the Polish restriction on ownership than an EU directive which bans majority ownership of European airlines from outside the bloc. It was just that which is understood to have thrown a spanner in the works of talks over selling the airline to Turkish Airlines last year. However, as the $3.4m sale of a 44% stake in Czech Airlines to Korean Air illustrated earlier this year, those eastern investors will accept a minority if the price is right.

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