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LOT Close To Bancruptcy  
User currently offlineDelta777Jet From Germany, joined Jun 2000, 1277 posts, RR: 3
Posted (5 years 9 months 2 weeks 17 hours ago) and read 11245 times:

Around two weeks ago, LOT cried for help of Lufthansa to rescue them, now it becomes clear what worries them. Beside slowing business traffic LOT listen to Mc Kinsey advisers and hedged the entire fuel for the next two years of operation at an level of 140 USD !!!

Now this is 3 times more than market price and LOT was already in financial trouble before.

Rumors going around that Centralwings will be closed down due to de-facto bancruptcy as the company is indebted hugely.

Will the polish government let LOT go bust or will there be a bailout ?


Fly easyJet
45 replies: All unread, showing first 25:
 
User currently offlineOA260 From Ireland, joined Nov 2006, 27099 posts, RR: 60
Reply 1, posted (5 years 9 months 2 weeks 17 hours ago) and read 11253 times:

WOW bad move. I certainly hope that LOT dont go bust. They are a good airline I would be so sad to see go . Central Wings should be shut down its nearly dead anyway.

I dont know what the Polish government can do as they have to abide by EU rules. Who knows what will happen. I hope it does not get to that stage.


User currently offlineAA1818 From Trinidad and Tobago, joined Feb 2006, 3435 posts, RR: 4
Reply 2, posted (5 years 9 months 2 weeks 16 hours ago) and read 11098 times:

Will LH come to the rescue? It would only make sense?

AA1818



“The moment you doubt whether you can fly, you cease for ever to be able to do it.” J.M. Barrie (Peter Pan)
User currently offlineMaverickM11 From United States of America, joined Apr 2000, 17649 posts, RR: 46
Reply 3, posted (5 years 9 months 2 weeks 16 hours ago) and read 11036 times:



Quoting Delta777Jet (Thread starter):
LOT listen to Mc Kinsey advisers and hedged the entire fuel for the next two years of operation at an level of 140 USD !!!

People need to learn to not do a thing McKinsey tells you to do. How anyone still hires them is simply beyond me, unless you're looking for guaranteed failure.



E pur si muove -Galileo
User currently offlineBennett123 From United Kingdom, joined Aug 2004, 7683 posts, RR: 3
Reply 4, posted (5 years 9 months 2 weeks 15 hours ago) and read 10888 times:

Does LOT have any come back on this.

User currently offlineMattRB From Canada, joined Apr 2005, 1624 posts, RR: 9
Reply 5, posted (5 years 9 months 2 weeks 15 hours ago) and read 10839 times:

Source? Can't find anything (in english - so that may be the issue) online. Nothing on LOTs English language website either.


Aviation is proof that given, the will, we have the capacity to achieve the impossible.
User currently offlineFlyingcat From United States of America, joined May 2007, 542 posts, RR: 0
Reply 6, posted (5 years 9 months 2 weeks 11 hours ago) and read 10453 times:



Quoting Delta777Jet (Thread starter):
Beside slowing business traffic LOT listen to Mc Kinsey advisers and hedged the entire fuel for the next two years of operation at an level of 140 USD !!!

Would this not make a LH rescue even more remote.

I am wondering in terms of acquistion whether even LH might wonder if they have to buy everything.


User currently offlineSkyguyB727 From , joined Dec 1969, posts, RR:
Reply 7, posted (5 years 9 months 2 weeks 9 hours ago) and read 10312 times:



Quoting Delta777Jet (Thread starter):
LOT listen to Mc Kinsey advisers and hedged the entire fuel for the next two years of operation at an level of 140 USD !!!

I wonder if the airline execs are using the airline's old advertising slogan "Thanks a LOT" in their discussions with their advisors.


User currently offlineDelta777Jet From Germany, joined Jun 2000, 1277 posts, RR: 3
Reply 8, posted (5 years 9 months 2 weeks 4 hours ago) and read 10085 times:

Here is the article, only in Polish. I dont understand Polish, but some friends told me what is inside:

http://www.dziennik.pl/gospodarka/ws...lacil_za_paliwo_az_280_mln_zl.html

So it says 280 mln. loss for LOT due to fuel hedging alone. Additionally many planes or engines coming due for heavy maintenance in 2009 and of course the good market currently.

As they sold all their real assets already there is only the option finding a new investor or asking state I guess. As many mentioned Centralwings is defacto dead, but why they keep it ?



Fly easyJet
User currently offlineAsiaflyer From Singapore, joined May 2007, 1140 posts, RR: 0
Reply 9, posted (5 years 9 months 2 weeks 4 hours ago) and read 10040 times:



Quoting Flyingcat (Reply 6):
Would this not make a LH rescue even more remote.

Indeed it does. If LH ever will be interested, they will wait until after LOT has filed for bankrupcy, so LOT can be restructured and get rid of fuelhedges and other burdens.



SQ,MI,MH,CX,KA,CA,CZ,MU,KE,OZ,QF,NZ,FD,JQ,3K,5J,IT,AI,IC,QR,SK,LF,KL,AF,LH,LX,OS,SR,BA,SN,FR,WF,1I,5T,VZ,VX,AC,NW,UA,US,
User currently offlineMgmacius From Poland, joined Jun 2007, 68 posts, RR: 0
Reply 10, posted (5 years 9 months 2 weeks 4 hours ago) and read 9976 times:



Quoting Delta777Jet (Reply 8):
Here is the article, only in Polish. I dont understand Polish, but some friends told me what is inside:

I can help!  Wink
They say that LOT overpaid for fuel more than 280 mln PLN (around 70 mln EUR), the guy responsible for that is probably going to be dismissed and sued. LOT lost in first 10 months of 2008 more then 459 mln PLN (110 mln EUR?), which is 624 mln worse than 2007.

BTW: I read somewhere, that Centralwings is doing OK now - they have charter agreements and can even make profit. Sadly, can't remember where, so no source now  Sad



734, 735, 738, 744, 763, 772, 773, A319, A320, A380, Dash8, E170, Saab340A
User currently offlineDelta777Jet From Germany, joined Jun 2000, 1277 posts, RR: 3
Reply 11, posted (5 years 9 months 2 weeks 3 hours ago) and read 9949 times:

The guy who did this, certainly not decided for himself to enter into such large agreement. Most likely top management was involved in the decisions, so that should be the guys to leave the job. I understand to enter a hedge for a certain period of time, but to do it for a couple of years ?!? Regarding Centralwings the situation is a bit unclear, as far as I'm informed they returned or will return most of the aircraft to their sub-lessor LOT and they going to return them to the real head lessor. Many if not all pilots already lost their jobs. So with which planes Centralwings is going to fly ? Who will secure them the future ? I guess they have huge obligations of more than 100 mio. Euros to pay ?!? It will be interesting to see, how this all will end..... I share the opinion of Asiaflyer, LH will not touch this massacre until they can pick up the remaining at a negative price tag.


Fly easyJet
User currently offlineMgmacius From Poland, joined Jun 2007, 68 posts, RR: 0
Reply 12, posted (5 years 9 months 2 weeks 3 hours ago) and read 9851 times:



Quoting Delta777Jet (Reply 11):
The guy who did this, certainly not decided for himself to enter into such large agreement.

That's for sure, but he is vice president of financials - I don't know for sure, but I think it's CFO in English, right? Anyway, heads have to roll, so he is the best target.



734, 735, 738, 744, 763, 772, 773, A319, A320, A380, Dash8, E170, Saab340A
User currently offlineAustrianZRH From Austria, joined Aug 2007, 1389 posts, RR: 0
Reply 13, posted (5 years 9 months 2 weeks 2 hours ago) and read 9746 times:

Does McKinsey hate airlines? Or love LH?

They advised SR... It became LX and got owned by LH...
They advised OS... It got owned by LH before they needed to change their code to VO...

Somehow I get to think that they are not really well suited for advising airlines.



WARNING! The post above should be taken with a grain of salt! Furthermore, it may be slightly biased towards A.
User currently offlineDelta777Jet From Germany, joined Jun 2000, 1277 posts, RR: 3
Reply 14, posted (5 years 9 months 2 weeks 1 hour ago) and read 9642 times:

Very good statement Austrian...... Would make good sense..... Funny how fast Swiss went out of the red and with OS will be the same....


Fly easyJet
User currently offlineAlessandro From , joined Dec 1969, posts, RR:
Reply 15, posted (5 years 9 months 2 weeks 1 hour ago) and read 9633 times:

Why would any airline want to take over LOT, Ryanair is all over their european market and
B787 delays are really troubling with a hedged fuelprice like that?
No, they got an interesting mix of planes, ATR, Boeing and Embraer that will find new users.
Lufthansa only got the B735 in common with LOT and they´re getting rid of them this year.
Only aircraft I could imagine they wanted to keep is the E170, E175 since they going for
the E190, but that´s not enough.

[Edited 2009-01-10 03:41:40]

User currently offlineKonrad From United States of America, joined Mar 2002, 529 posts, RR: 0
Reply 16, posted (5 years 9 months 1 week 6 days 22 hours ago) and read 8443 times:



Quoting Delta777Jet (Reply 11):
I share the opinion of Asiaflyer, LH will not touch this massacre until they can pick up the remaining at a negative price tag.

Second that, LH is not stupid to do otherwise.

Quoting Alessandro (Reply 15):
Why would any airline want to take over LOT, Ryanair is all over their european market and B787 delays are really troubling

Ryanair is all over the PL-UK and PL-Ireland market, not much elsewhere.

Now, if LOT goes down I don't think anyone will pick up the transatlantic market. It is low yield and highly seasonal. Eventually a UA (or AA) ORD-WAW or DL JFK-WAW route might work if LOT goes completely out of business. A lot of transatlantic flying out of Poland is already now being handled by LH via FRA and MUC, especially out of regional airports.

In Europe, the only part of business which is worth picking are major destinations out of Warsaw. I mean LHR, CDG, BRU, AMS, FRA, MUC, MXP, VIE, ARN, SVO and not much else. There is some business traffic to those destinations, the customers are loyal to Star Alliance (Miles&More is the FF program of LOT) and they are used to non-stop flights out of Warsaw. A Warsaw based version of Lufthansa Italia might work, say Lufthansa Polska or mini-LOT (to keep it sort of Polish - but please, do not hire anyone from LOT management). To cover those destinations (plus Star Alliance hubs) 10 aircraft might be enough, EMB-170/175 or 190, maybe 319s in the future.

Traffic from Warsaw to secondary destinations in Europe is already now handled by LH, SK and OS offering several connections per day via their hubs. This is why LOT had to close down VCE, LYS, STR, MAN, OSL in recent years.

Apart from Warsaw, all regional airports of any importance (KRK,GDN,WRO,POZ,KTW) are dominated by low-cost (FR to UK and Ireland) and Star Alliance LH/SK offering good long-haul and intra-Europe connections via FRA/MUC/CPH. There is not much business traffic out of regional airports and most of it is handled via FRA/MUC/CPH, not WAW, because of better connections. The regional airports wouldn't even notice if LOT goes out of business.

Domestic flights in Poland are mainly connections via WAW which can be easily replaced by more fligths or more capacity on existing FRA/MUC/CPH flights. The only two domestic routes which sustain up to 8 daily ATR-72 flights are WAW-GDN and WAW-WRO. Those routes might work as a low-cost venture, mainly due to the long travel time by train and notoriously bad polish roads.

To summarize, I am afraid LOT got themselves out of business by having no good strategy for years, being unable to profit from their Star Alliance membership and bad management in general (see the Centralwings fiasco and fuel hedging disaster). There is not much value left to be picked up.

Another thought: might someone else be interested in picking up bits of LOT? AF/KL? BA? (rather not). Well, if AF/KL makes a move, LH might have to take a more active stance.


User currently offlineLipeGIG From Brazil, joined May 2005, 11442 posts, RR: 58
Reply 17, posted (5 years 9 months 1 week 6 days 21 hours ago) and read 7913 times:
AIRLINERS.NET CREW
FORUM MODERATOR

Very bad to see such move... my only question is that, when it was clear that the world is going into a major recession, why not to revert the hedge, even with a minor loss ?
Hedging is something very serious, and need to be used with extreme carefull. If you want to hedge one side, is because you have the other hedged (for example hedge the USD x EUR rate because an airline has a lot of revenue in USD and more expenses in EUR). Airlines that decide to "play" in the last minute of the game trying to copy Southwest and others (and this group is day after day getting a new member... ) realize that hedge is good on a positive and stable environment with global growing that could drive oil prices up, but it's terrible in the opposite situation.
May be we see in the future less airlines looking for hedge as they always can impose fuel surcharges while prices move higher. But you can't charge a premium or a surcharge while your competitors are purchasing fuel at 1/3 of your price.

Risks are too big now.



New York + Rio de Janeiro = One of the best combinations !
User currently offlineHT From Germany, joined May 2005, 6525 posts, RR: 23
Reply 18, posted (5 years 9 months 1 week 6 days 21 hours ago) and read 7912 times:

If LO cannot get out of that fuel-hedging contract, I have no high hopes for their survival.

Quoting MaverickM11 (Reply 3):
People need to learn to not do a thing McKinsey tells you to do. How anyone still hires them is simply beyond me, unless you're looking for guaranteed failure.

Copy that for my employer (non-aviation business).

Quoting Konrad (Reply 16):
The regional airports wouldn't even notice if LOT goes out of business.

First LO discontinued flights to WAW from my homebase of HAJ, meaning I am back on a 2-transfer routing to RZE.
Now, with LO's overall future in even greater doubt than before, I better wait before purchasing 3 tickets for September - or change my plans alltogether and go by car (even though it will be a 2-day drive to the extreme southeast corner of Poland = Przemysl).
-HT



Carpe diem ! Life is too short to waste your time ! Keep in mind, that today is the first day of the rest of your life !
User currently offlineBuslover From Germany, joined Jan 2004, 109 posts, RR: 0
Reply 19, posted (5 years 9 months 1 week 6 days 21 hours ago) and read 7715 times:

Why don't they ask other consultant companies, like BCG or Siemens?


The best airplane is the one you fly
User currently offlineHumberside From United Kingdom, joined Dec 2005, 4923 posts, RR: 4
Reply 20, posted (5 years 9 months 1 week 6 days 19 hours ago) and read 7140 times:



Quoting Konrad (Reply 16):
The regional airports wouldn't even notice if LOT goes out of business.

I think Rzeszow and especially Krakow would miss their transatlantic flights since its very unlikely they would be replaced



Visit the Air Humberside Website and Forum
User currently offlineQazar From Canada, joined May 2006, 338 posts, RR: 0
Reply 21, posted (5 years 9 months 1 week 6 days 17 hours ago) and read 6201 times:



Quoting Konrad (Reply 16):
A Warsaw based version of Lufthansa Italia might work, say Lufthansa Polska

I like that option!!! ... And the LH empire expands... I always thought LH would actually purchase LOT outright and were simply waiting for government privatization to pounce on the opportunity. But given the state of LOT, I don't think it would be a good idea to buy them as it woud be to grow the LH brand as they are doing in Italy... Nicely said Konrad!


User currently offlineCubsrule From United States of America, joined May 2004, 23148 posts, RR: 20
Reply 22, posted (5 years 9 months 1 week 6 days 16 hours ago) and read 6016 times:



Quoting Humberside (Reply 20):
I think Rzeszow and especially Krakow would miss their transatlantic flights since its very unlikely they would be replaced

Between the VFR traffic and some tourist and business traffic, I think KRK could probably sustain some level of (seasonal?) TATL service.



I can't decide whether I miss the tulip or the bowling shoe more
User currently offlineAlessandro From , joined Dec 1969, posts, RR:
Reply 23, posted (5 years 9 months 1 week 6 days 7 hours ago) and read 5635 times:

AF/KLM also got very little incommon with today´s fleet of LOT, B734, perhaps they´re interested in the E170, E175 but thats it.
BA makes more sense, they already got the B734 and B763, waiting for the B787 (LOT is infront of the line) and their subsidary will get the E170. So it´s basically the ATRs that don´t fit in so well with them.

[Edited 2009-01-10 21:49:15]

User currently offlineCricket From India, joined Aug 2005, 2971 posts, RR: 7
Reply 24, posted (5 years 9 months 1 week 6 days 7 hours ago) and read 5628 times:

I would doubt how any sensible company dis not take a 'Put' option on the fuel. Unless $140 was the 'Put', but given how volatile oil has been some, many carriers 'Put' options were at the $80-100 level.


A300B2/B4/6R, A313, A319/320/321, A333, A343, A388, 737-2/3/4/7/8/9, 747-3/4, 772/2E/2L/3, E170/190, F70, CR2/7, 146-3,
25 Post contains links MarcinGDN : Hi, LOT would already be bankrupt if not a huge loan from PKO BP (Polish Bank - state owned). It is not official news though. Regarding the hedge, whe
26 Delta777Jet : MarcinGDN: In most you are right, but the age of aircraft isn't really a big point. I guess K2 and LOT operate their 737 and ATR fleet already many ma
27 Konrad : This is a sweet plan, a single type 28 aircraft fleet could do the job easily and economically. Not to mention the major gain - getting rid of the ol
28 Konrad : They did own most of them. They sold them and leased back a couple of years ago to improve the books. Most of the valuable real estate they owned is
29 Delta777Jet : Yes brand name I agree, but a brand is always connected to a product. In airline industry I would define such product for example Lufthansa - Reliable
30 Alm1 : Speaking about brand name. How is Norwegian base in Warsaw doing? Are most people already aware of their services? It is not obvious choice to fly bet
31 Delta777Jet : AIM1: Norwegian is doing okay, as far as I heard and according to my information they work with Amadeus, so they should be displayed and bookable. Mos
32 VV701 : Hmm. A bit hard on McKinsey. To the best of my recollection when crude was over $135 a barrel and still rising nearly all economists and consultants
33 Post contains links Mariner : McKinsey swings with the fashionable breeze. They are the ones who advised United, for a very hefty fee, to start Ted, because LCC's were then all th
34 MarcinGDN : I still would love the 787 in the fleet.. additionally to the all Embraer fleet of 170/175 and 195 DeltaJet777: I really do like LO, more than LH.. T
35 LTBEWR : I also suspect for LOT on longhaul to/from the USA, that there has been a large drop in visitors to/from the USA as well as immigration to the USA due
36 MarcinGDN : Thanks LTBEWR, I think now I understand why I always choose MUC over FRA. Bavaria is Catholic. Yeah, I would prefer some other airline.. like SQ :P e
37 HT : Do not forget to include all those various airlines in "Team Lufthansa" with their various a/c-types when comparing fleet types ... A few of them are
38 BlueSky1976 : The case of LO is a classic example of a government-owned enterprise which operates with no solid long term business strategy. They could have been ex
39 MaverickM11 : ...meanwhile those same economists were witnessing the exact same thing happening to housing prices, except shift about a year earlier. The endless r
40 MarcinGDN : So there is commonality between K2's ATRs and Air Dolomiti equipment.
41 MarcinGDN : Well said! Rather an obstacle.. Premium traffic that goes with LH or SK.. except the p2p from WAW. I'm not so sure if it was brilliant.. Anyway at le
42 BlueSky1976 : LO had a long tradition of serving PEK that went back to mid-1980s I believe. Same for BKK and DEL, where it had steady flow of passengers filling th
43 MarcinGDN : Those routes - for sure BKK and PEK - were usually full.. SIN might have been though at those times, too. Anyway LO axed all of them as being deficit
44 Delta777Jet : Exactly, the routes were all together axed because a plane can even be full and still loose money. Some people would not believe it, but its true. To
45 MarcinGDN : True, hard to believe. But if LO had 18 and 12 C seats in the -300ER and -200ER respectively from the early 90s, one has to know that LO could not re
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