LOT Polish Airlines Swings to Net Profit, Says Boeing 787 Helps

By Marcin Sobczyk

WARSAW--After years of heavy losses that pushed it to the brink of bankruptcy, state-owned carrier LOT Polish Airlines swung to a symbolic net profit in 2013, saying Wednesday it boosted passenger numbers and saved fuel by using Boeing Co.'s (BA) 787 Dreamliner jets.

LOT made 26 million zlotys ($8.6 million) compared to a loss of nearly PLN200 million it had projected for the year in a restructuring program sent to the European Commission. The company is on the radar of the European Union executive after tapping PLN400 million in a government loan in 2012 that saved it from insolvency.

The Commission has said it's checking if the loan complies with the EU's competition laws. The airline has already had to shrink its business as a way of remedying the distortion the state aid has caused to market competition.

Brussels may yet rule if the aid violated rules. The airline said Wednesday that the signs it's receiving from the European Commission are encouraging.

The net profit figure includes an undisclosed amount of compensation LOT last year negotiated with Boeing for the global grounding of the Dreamliner jets in early 2013 after battery malfunctions on some aircraft.

On the operating level, without the compensation, LOT generated a small loss of PLN4 million compared to a loss of PLN142 million it had projected.

LOT has been close to bankruptcy several times over the past decade due to high fuel costs, fierce competition in Europe and failed fuel hedging bets. LOT said it may yet tap more government funds this year, but will likely generate PLN70 million in operating profits.

LOT will struggle to utilize the sixth Dreamliner jet it will soon receive because it can't open new routes as a result of the ongoing restructuring, it said.

If Brussels clears the government aid LOT has received, restrictions on growth initiatives will end in October 2015. The Polish government has talked to a number of possible investors in the airline, so far to no avail. Talks with a potential strategic buyer will continue this year, LOT said.

Write to Marcin Sobczyk at [e-mail]

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