LOT Polish Turns 2022 Profit Despite Ukraine War Challenges

LOT Polish, Poland’s national airline, claims to have earned a 8.3 billion Polish zloty ($26 million) net profit last year. The result marks a return to profitability after two years of heavy losses caused by the Covid shock, and marks an improvement over the $18 million net profit LOT managed in 2019.

LOT carried nearly 8 million passengers last year, filling more than 80% of its seats, it said earlier in July. Revenues totaled about $1.9 billion. LOT, despite announcing its profit, does not release audited financial results.

“LOT is profitable, LOT is hospitable, and LOT is punctual,” newly-appointed President Michał Fijoł said. Its 2022 recovery, importantly, unfolded despite severe challenges. The war in neighboring Ukraine forced a redesign of LOT’s flight network, which previously featured service to six Ukrainian airports from multiple Polish cities. In addition, the war has prevented LOT’s Asian flights from crossing through Russian airspace, adding more than two hours of flight time on key routes. One of LOT’s major strategic initiatives has been positioning Warsaw as a connecting hub to East Asia for Europeans. This summer, it’s serving Beijing, Tokyo, and Seoul, having previously served Singapore as well. It’s even serving Seoul from Budapest now, in the absence of a Hungarian longhaul airline.

India is another expansion market for LOT, offering Warsaw flights to Delhi and Mumbai. Westbound from Poland, North America is key. LOT currently serves New York JFK, Newark, Chicago O'Hare, Los Angeles, Miami, and Toronto, in Newark’s case not just from Warsaw but also Krakow and Rzeszow. It also flies nonstop from Krakow to Chicago, long home to many Polish immigrants. All of its longhaul flights are operated with Boeing 787s. In fact, LOT’s total scheduled summer seat capacity on longhaul routes — defined here as those exceeding 3,000 miles — is 7% greater in the third quarter than it was in the same period of 2019, according to an Airline Weekly analysis of Cirium Diio data.

Nevertheless, LOT’s total third quarter seat capacity remains 17% below what it was four years earlier. Total scheduled flight departures, meanwhile, are down by a quarter. That’s heavily influenced by the Ukraine withdrawal, as well as by its exit from the three routes to Russia it flew before the war (Warsaw to Moscow, St. Petersburg, and the enclave of Kaliningrad). Germany, the UK, Lithuania, and Hungary are other important country markets where LOT has cut capacity sharply.

Within Europe, LOT faces intense competition from low-cost carriers, including Ryanair, which operates a Polish subsidiary. In early 2020, LOT struck a deal to buy the German airline Condor, in part to amass more scale to compete. It quickly abandoned the deal once Covid arrived. One future outcome, if LOT can impress investors with additional profits, is privatization. The company also includes several auxiliary businesses providing services like maintenance and airport ground handling. Cargo accounted for about 9% of the company’s revenues last year.

For all of LOT’s past problems — it was kept alive with government bailouts on multiple occasions — Poland is a market many airlines are watching closely. Its home to nearly 40 million people, surpassed in the European Union by only Germany, France, Italy, and Spain. In addition, Poland plans to build a new mega-airport for Warsaw, opening perhaps before the end of this decade. It’s envisioned to become a major global air traffic hub.  

In its earnings release, LOT said its 2022 profits make it “cautiously optimistic” that it can quickly repay liabilities associated with state aid, while also funding “our ambitious development assumptions.”