"LOT ended the year 2014 in black. With over PLN 99 million profit on its core business, which is flying, LOT earned 40% more than planned" - said Sebastian Mikosz, CEO at LOT Polish Airlines. This is the first company's profit in seven years.
LOT was meant to end the past year with about PLN 70 million profit on the core business. It ended up with around 99.4 million. It is almost 30 million above the Restructuring Plan assumptions, and 103 million more than in 2013. The company is steadily improving its situation, stabilising the financial condition and getting ready for rapid growth in the next year.
"The positive result on the core business, which is a key indicator of the company's health, is of utmost importance here, since it has been achieved regardless of the compensation measures adopted required by the European Commission. Because of the public aid received, we had to cut the number of flights by almost 8% in 2014, compared to the previous year. Nevertheless, we carried 2% passengers more and simultaneously increased the revenue in comparison with the past year while keeping a similar cost level” - says Sebastian Mikosz, CEO at LOT Polish Airlines.
The company owes its positive results to consistent changes and initiatives included in the Restructuring Plan. Most of them were added as early as in 2013, and the 2014 was the first full year to have seen the results. LOT continues to modernize and expand its sales channels, including mobile solutions. The quality of service is gradually improving. The offer is expanded and new products are added to address new passenger groups in the market.
Also, the new philosophy of building a network has paid off. LOT has increased its connecting capacities by as much as over 40% in its Warsaw hub. That means that those travelling via Warsaw have much more convenient transfer options available on their way to many destinations in the world. Such options are among the reasons why LOT becomes the first choice airline for a constantly growing number of passengers from Poland as well as the entire Eastern and Central Europe region.
2014 was also the first year to have seen the so-called 'Dreamliner effect' to work, as only in the entire past year, all long-haul flights were operated exclusively with those advanced aircratfs. Boeing 787 is not only popular among the passengers, but also bring tangible benefits, such as fuel savings. At present, LOT operates 6 Dreamliners on schedule network, leases them to other airlines and operates long-haul charter flights in winter season. An efficient use of the Dreamliner fleet is included in the Restructuring Plan.
"The results in 2014 show that we can operate effectively in this very competitive market, and there is a place on the market for such a carrier as LOT. However, we have to remember that this is just the first step of transformation and more challenges are ahead. This year, we are bound to at least repeat the financial success, as it is our goal to achieve sustained profitability and to move from restructuring to a rapid growth of the company” - Sebastian Mikosz adds.
Other than the result on the core business (operating result in all segments of aviation business taking into account the sales and general company management cost), LOT has also improved other indicators. The EBITDA - indicator of company performance, which determines the cash flow generating ability, was also improved. EBITDA in 2014, is of the order PLN 291 million. To compare with the previous year, it amounted to PLN 156 million in 2013, and in 2012 to minus PLN 346 million.
The normalized net profit, i.e. without one-offs and accounting effects, is also positive and amounts nearly to PLN 36 million. On the other hand, taking into account the one-offs and accounting effects, related to the increase of currency exchanging rates (mainly of the dollar), a minus appears at the net result, at the level of 263.4 million. This is only an artificial accounting record having no effect on the actual financial health of the company. It is because the relationship between LOT's earnings and spending in foreign currencies is fairly well in balance. Therefore, no currency is in fact exchanged, but only the amounts are booked in PLN according to the valid standards. The net profit in the previous year amounted to PLN 26 million. The normalized net profit in 2013 was minus 67 million.
Owing to the consistent improvement of its financial condition, LOT postponed and considerably reduced, by as much as two thirds received the second state aid tranche. It was received at the end of 2014 in the amount of PLN 127 million. It should be emphasized that the amount of state aid has no effect on the result.Currently, the works on the company's growth policy for 2016 are underway. It will be announced in the next few months, including new short- and long-haul destinations. LOT will start flying on those routes at the beginning of the next year, when the Restructuring Plan is formally ended.