Poland reportedly asks Norwegian Air to rid it of LOT

By bne IntelliNews May 2, 2013

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Speculation is flying once again over the future of LOT Polish Airlines, with Norwegian Air having confirmed that it met with officials in Warsaw recently.

Norwegian Air CEO Bjorn Kjos travelled to Poland to meet with government representatives, the company confirmed on April 30, according to Norwegian media, but refused to discuss the agenda. "I can confirm that Bjorn has been at a meeting with authorities in Poland," Norwegian Air's communications director Anne-Sissel Skanvik told newspaper Dagens Noringsliv, according to Views and News from Norway. "I can't say anything about the subject of their talks."

Meanwhile, Polish newspaper Rzeczpospolita claims that an investment into, or takeover of, the struggling Central European airline was the topic of the talks. Kjos has reportedly asked for more detailed information from the flag carrier.

Warsaw will be hoping the Norwegians like what they see. LOT has been loss-making for years. It had promised to turn itself around in 2012, but ended up asking the government for yet another handout. Prime Minister Donald Tusk is clearly nearing the end of his patience, and said recently that the company must sink or swim.

Letting the country's flag carrier go under would be a controversial move, however, it merely illustrates the level of desperation in the industry in Europe. The crisis, matched with sky high fuel prices, has many national airlines across the continent right on the edge. Hungary's Malev already collapsed last year. However, that long list of potential sellers is mirrored by a very short list of suitors.

The most likely buyers from a strategic and financial point of view are the cash rich operators in the east looking for a European hub. However, EU rules forbid companies outside the bloc owning a controlling stake in its airlines. A deal to sell LOT to Turkish Airlines collapsed last year on just that issue. It also saw the Czech Republic agree earlier this year to sell a 44% stake in Czech Airlines to Korea Air, for a minimal sum.

Therefore, Warsaw will be licking its lips at the prospect of hooking the cash-rich Scandinavians. LOT is clearly aware of Norwegian Air's strong recent results, and hopes it may have the financial muscle and interest to take the troublesome carrier off its hands. The two airlines may also be a good strategic fit, since Norwegian has long been active in the Polish market and now is keen to expand with long-haul routes.

LOT's recent strategy has been to increase its own long-haul operations, and last week announced that it hopes to have its two Boeing 787 Dreamliners back to service US and China routes in June. The Polish airline has another six of the highly efficient jets on order, with the first set for delivery this month. Already in expansion mode, according to Views and News from Norway, Kjos has been looking for more Dreamliners himself. The likelihood of picking up LOT for a bargain price will only add sugar.

Kjos declined immediate comment and a Polish spokesman would confirm only that the privatization process for LOT is underway "and we have contact with possible private investors. But we won't say anything about our talks underway."

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