Poland’s national airline LOT will receive state aid worth 650 million euros to see it through the Covid-19 pandemic.
European regulators have cleared the Polish government’s plan to provide flag carrier LOT Polish Airlines with around 650 million euros in financial support to help it through the Covid-19 pandemic.
The support consists of subsidised loan worth 400 million euros (approximately 1.8 billion zloty) and a capital injection of around 250 million euros (1.1 billion zloty). The measures were approved under a temporary framework that eases state aid rules during the coronavirus crisis.
LOT suffered substantial losses in the second quarter of 2020 due to the Covid-19 pandemic and the travel restrictions that Poland and other countries had to impose to limit the spread of the coronavirus. The airline resumed international flights on July 1, almost four months after suspending them.
LOT’s key role
The significant drop in travel demand continue to deteriorate the financial situation of the airline, which is currently facing the risk of default and insolvency. The aid measures intend to restore LOT’s equity and liquidity position, in order to ensure the continuation of the air transport services in Poland that LOT provides.
“LOT plays a key role in the connectivity and economy of Poland,” says Margrethe Vestager, the European Commissioner in charge of competition policy. “While the decision ensures that the state is sufficiently remunerated for the risk taxpayers assume, the support comes with strings attached, including a dividend ban as well as further measures to limit distortions of competition.”
LOT will also be prevented from acquiring more than 10 per cent in competitors until at least 75 per cent of the recapitalisation is redeemed.
In April, LOT was forced to pull out of a bid to purchase German carrier Condor.
State-run Polish Aviation Group, which owns LOT, had agreed in January to buy Condor for about 300 million euros, potentially creating a leading European aviation group with more than 20 million passengers a year.
Condor has been struggling ever since its former parent, UK travel group Thomas Cook, went into administration last year.
The collapse of the deal was a blow for the Polish government, which has made economic nationalism a key part of its agenda and trumpeted the takeover as a reversal of the trend of the past three decades, when Polish groups were frequently bought by foreign — often German — investors.
Since then, LOT – which has launched several long-haul routes from Budapest in recent years – has been touted as the probable major partner in a new Central European airline that has been discussed by leaders of the Visegrád Four, or V4 (Czechia, Hungary, Poland, and Slovakia). The new airline would have bases in all four Visegrád capitals.
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