LOT Polish Airlines’ financial results continue to take off

The airline has not only carried significantly more passengers than planned, but has also successfully achieved its scheduled income for the year. LOT continues both to head the airlines operating in Poland and to record a more dynamic rise in numbers than its equals in Europe.

Since the beginning of the year, LOT has carried almost 2.5 million passengers (2,499,000) which means not only that there has been a growth of almost 12% in relation to last year, but also that the airline has attained results which are better, by 5%, than in 2008, prior to the crisis in the sector. Scheduled flights alone brought the Polish carrier over 2,233,000 passengers, an increase of almost 9% on the figures for 2009, with the rising popularity of charters accounting for the rest.

As Sebastian Mikosz, Chairman of LOT Polish Airlines S.A.. points out, "According to the data published on 2nd September this year by the Civil Aviation Office, LOT continues to be the largest carrier in Poland," going on to add, "We are one of the few European airlines to have recorded so significant an increase in flights, leaving competitors flying to and from Poland standing."

Together with the increase in flights, LOT has improved its load factor, the take-up of seats on a plane. In the first half of the year, the level reached almost 75%, an improvement of as much as 4% on the previous year. In comparison, the average load factor for 2009 was 70% and, for 2008, 73%.

The combined income for the first seven months of 2010 was PLN 1 billion, 622 million, meaning that the level of returns has been maintained in relation to the PLN 1 billion 615 million for 2009. It is true that the airline recorded figures lower by PLN 48 million on last year for technical aircraft services. This is primarily connected with the decision to focus on core operations, namely, passenger and cargo transport and the intensified inspection of the airline's planes which this gave rise to. The level of income for the period in question has risen by almost PLN 105 million from one year to the next.

The net results for January to July this year are minus PLN 64 million, which is a significant improvement on the results for 2009, at minus PLN 124 million and 2008, at minus PLN 118 million. However, the operating results, at minus PLN 35 million, were significantly better than for the previous two years, with minus PLN 170 million for 2009 and, particularly, minus PLN 175 million for 2008. In analysing the Company's operating results, it is worth emphasising that, at minus 2%, LOT's operating margin is placed at either the same level or somewhat higher than the average for other European carriers which have also recorded negative margins. The financial results obtained were primarily, and crucially, affected

by fluctuations in exchange rates and aviation fuel prices, both of which had a negative impact on the Company, as did the volcanic eruption in Iceland. Nonetheless, it proved possible to economise and make savings in order to cover the rise in fuel prices and ensure that this was not passed on to the passengers in the form of higher ticket prices.

LOT continues to implement its restructuring programme. The Company has succeeded in restoring financial liquidity and has also gained the trust of its creditors, clients, major suppliers and investors. Also worthy of emphasis is the termination of the Collective Bargaining Agreement, which had remained in place for many years and a significant reduction in employees. The results for the entire LOT Group have improved markedly. The unprofitable Centralwings and LOT Ground Services companies were liquidated with no loss to our share of the charter and ground services market. At the same time, the value of the companies improved significantly, which is reflected in the current valuation. The potential sale of part of these shares will give LOT the opportunity of providing financial support for its investment programme and further development.

The Company is successfully gaining a market. The first positive results in this area were already visible by the end of 2009 and in the first quarter of 2010. The newly-launched direct flights to Tallinn, Beirut and Yerevan have enjoyed great success. In addition, between July and August this year, the Company carried out 16 charter flights to Japan and, within the forthcoming six months, further direct flights, to Tbilisi, Cairo, Damascus and Hanoi will be introduced. The planes which will be flying those routes in the next few months are already rapidly filling up.

The positive effects of restructuring are visible to the naked eye. Despite the crisis which persists on the airline carrier market, the negative impact of the exchange rates and the considerable increase in aviation fuel prices, LOT has succeeded in improving its average mean returns. It has also maintained its position as the leader on the Polish market and is making good the losses of previous years, says Sebastian Mikosz, the Chairman of the LOT Polish Airlines. What pleases us the most is the fact that passengers are returning to board our planes so readily.