Polish Airline LOT Gets EU Approval for €650 Million State Aid

Dec. 22—WARSAW/ BRUSSELS — The European Commission approved on Tuesday 650 million euros (795 million dollars) in state aid for Poland's flagship airline LOT, the EU executive said in a press statement.

LOT will receive a 400-million-euro subsidized loan for financing investment and working capital needs, as well as a capital injection of 250 million euros, the statement said.

The aid package will restore LOT's equity and liquidity position and prevent insolvency, "which would have serious consequences on Polish employment, connectivity and foreign trade," the commission's statement reads.

The support mechanism comes with strings attached, including a dividend ban, and restrictions on mergers and acquisitions (M&A) activity, according to the statement.

Poland is to receive an "appropriate remuneration" for its capital injection and the deal includes measures aimed at incentivizing LOT to redeem the state's equity injection.

LOT, like its competitors in the aviation industry, was hit hard by the coronavirus pandemic, ensuing travel restrictions and the drop in demand for travel.

The company recently said it expects to handle 2 million passengers in 2020 compared to the pre-Covid-19 plan for 12 million passengers. In 2019, LOT handled over 10 million passengers for the first time ever.

At the beginning of the year, the Polish airline planned to take over German charter airline Condor, but the deal fell apart during the global Covid-19 health crisis, with LOT stepping back because of problems of its own.

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