Clear skies for expansion
Celebrating 90 years of business, LOT has dug itself out of dark times and is now a leader in the CEE region’s air travel market, flying to over 100 destinations worldwide.
Ten years ago, LOT Polish Airlines was nose-diving into financial ruin, with just 18m zł left in the bank. When Rafał Milczarski came onboard as CEO, he had a mountain of problems to deal with, but with his private sector experience and strong knack for making deals, the company started to take off. Today, LOT is one of the fastest growing airlines in the world, now operating two transport hubs in Warsaw and Budapest.
The state-owned airline had reported losses every year between 2007-2012, forcing it to ask the Polish government for €200m to avoid bankruptcy. The EU approved the rescue plan in 2013 under the condition that the airline would restructure to consolidate its natural competitive advantage. In compliance, the company had to terminate operations between mid-2014 and the end of 2015 on a number of routes and to trim costs to regain its long-term viability. The new strategy for long term growth was prepared in 2015. The financial aid bumped the airline out of the red, and in 2016 its profits rose to over 200m zł – a small sum compared to the loan, but a step in the right direction.
So what accounted for this rapid turnaround from crisis to expansion? Under the direction of newly elected President of the Board, Rafał Milczarski, LOT announced in 2016 its new strategy which focuses on profitable growth and aims to become the leading airline in Central Eastern Europe. By taking advantage of the dynamic market in the region, LOT developed a strong network of connections and strengthened its position in the air travel industry. Last year, the airline transported nearly 9 million passengers – an increase of two million since 2017 – across 111 connections worldwide, including direct longhaul, short-haul and domestic flights.
At this year’s International Media Tour hosted by Poland Today, Milczarski said he needed to “change the mentality of the company from doom and gloom and failure to the mentality of the winner, which was not easy.” Coming from the private sector as an entrepreneur in the railway market, he knew how to get results. “If you want to be successful, you have to be willing and able to devote your attention and time, sometimes to the nitty-gritty details – and the results were outstanding,” said Milczarski. Paying attention is imperative when negotiating deals for aircraft acquisitions, he continued, especially when it comes to asking for a better price: “I inspired my people not to be ashamed. If I’m not ashamed to ask if something can be cheaper, they must not be ashamed either. And I always ask for a cheaper price for good quality. I’m absolutely proud of it.”
In line with its strategy, the carrier has added 65 new routes and has expanded its fleet by more than 40 aircrafts, bringing the total up to 90. This september, a brand new LOT-operated Boeing 787-9 took off from Delhi to Warsaw, launching the new transcontinental long-haul flight which will now operate five times per week to LOT’s 6th Asian destination. Considering almost 9.5 million passengers travelled between India and europe during the last 12 months, the airline jumped on the opportunity to cater to this market. But other factors also contributed to this strategic decision – India is one of the largest markets in Asia for Polish businesses. According to LOT, Poland is an important investment market for India, such as in the IT sector, and a gateway to all countries within the european union: “The new connection is a key element in strengthening economic ties and developing business relations between the two countries.”
While expanding its network of connections from Budapest, LOT announced it will launch flights from Hungary, marking another stage of market consolidation. starting with non-stop flights to seoul, plus six new european destinations in March, LOT will operate 12 routes from Budapest. Jost Lammers, CeO of Budapest Airport, said, “This development of the route network of LOT’s base in Budapest will strengthen Hungarian ties in business and tourism within and outside europe.”
Back home, Milczarski supports the government’s plan to build the solidarity Transportation Hub. He said this is one of the best infrastructure projects in europe at the moment. “Once they overcome the regulatory hurdles and the master planning, investors will be killing to get involved,” he added.
LOT is one of the world’s oldest airlines still in operation. Established in 1928, the Warsaw-based company has 90 aircrafts in its fleet and flies to over 130 destinations across Europe, Asia and North America. Most of the flights take off from its hub at Warsaw Chopin Airport but the Star Alliance member plans to expand once the Solidarity Transport Hub is built which will integrate air, rail and road transport.
Rafał Milczarski is the President of the Board of LOT Polish Airlines. He has also served as the President of the AIRiE Association (Airlines International Representation in Europe) as well as the Polish Aviation Group. Previously, he co-founded Baltic Rail, one of the first private railway carriers of goods in Poland and founded Freightliner PL and its German subsidiary.