The restructuring plan implemented in the company LOT Polish Airlines (LOT) brought a partial recovery of the financial situation, and given the carrier aid saved it from bankruptcy, according to an audit conducted by the Supreme Chamber of Control (NIK ). However, in the opinion of the NIK, the results obtained are still not give reason to conclude that the existence of the company is not threatened, nor that it will reach sustained profitability and, consequently, will generate profits – what was the purpose of giving aid. According to NIK, the national air carrier “has little chance to survive without the investor.”
“Granted LOT aid in the amount of 527 million zł saved the company from bankruptcy, and taken to an approved by the European Commission’s Restructuring Plan decisive restructuring actions yielded better results. the company’s situation, however, is still a serious and without finding an investor the chances of the company to survive in a highly competitive aviation market are small, “- said in a statement.
NIK ended control” Restructuring and privatization of Polish Airlines LOT SA ” The audit covered the period from 2012, while in the case of some issues concerning the settlement of execution strategies and restructuring plans and the development of the company’s financial situation was also analyzed documents and data from the years 2009-2011.
“The Supreme Chamber of Control is critical of the process of restructuring LOT, in particular those of the Management board of the company and supervising the company’s Minister of the Treasury in the period preceding the granting of state aid in December 2012. unrealistically planned revenues and expenses, and further restructuring programs were created without a thorough analysis of the causes of failure of the measures taken based on previous programs . Every year incurred losses of a company covered by selling assets owned. When this property was missing, the company only creditors and the owner owes that was not bankrupt “- we read on.
implemented by LOT since 2013. – after obtaining aid – Restructuring Plan brought a partial recovery of the financial situation. As a result of the implementation of the Plan, in 2014 – the first time in seven years – Profit from core activities.
Covered by the control stage of the Restructuring Plan pointed to the significant weaknesses. First of all, it takes too optimistic assumptions regarding. Feasibility of parts of the planned activities and achieve its economic effects. In particular, this refers to the size of the planned revenues from ticket sales, sale and return of leased aircraft, initiatives to lower fuel costs and reduce the wear and allow a reduction in the cost of services, in particular for the use of the airport. F. Chopin or Polish airspace, stressed the SCC.
The positive financial result of the company’s core business for 2014. Was the result of both the implementation of the restructuring measures (eg. Lower the cost of staff salaries), as well as the postponement of during part of the planned Restructuring Plan for 2014. activities (eg. not returned Embraer and B737), related to incur significant costs. Such costs will have to be incurred in subsequent years. Obtaining profit was also supported by declines in the oil price in the amount of unreported since the turn of 2008-2009, also identified.
In the opinion of NIK, a big threat for the business LOT is the fact that many of the weaknesses of the company named to the needs of the development plan restructuring analysis is still current (in particular the lack of unencumbered assets and high debt against the company very high costs of operation and, consequently, limits the necessary investment, lack of modern aircraft wąskokadłubowego family of A319 / A320 or B737, inefficient use of regional aircraft E170- 195).
Analysis of the company’s operations during the period covered by the audit indicates that the most serious problem the carrier is insufficient in relation to the costs revenues, particularly steadily declining rate achieved revenues per one passenger. This means that the main way to increase profit is a significant increase in the number of sold tickets, which due to the huge competition in the aviation market can be a very difficult task. Critical business LOT will be the I half of 2016., When the carrier is faced with the necessity of launching of new routes, where the preparation and implementation incurs additional costs (acquisition of aircraft, slots, crews, promotions, changes in reservation systems, etc.). Owned by the company resources may be insufficient, and hence – the key problem remains finding sources of financing for development.
Meanwhile, the award of another public aid is no longer possible, and carried out so far trying to find an investor interested in buying shares in LOT They proved ineffective, which resulted – according NIK – mainly from the extremely difficult economic and financial situation of the company. Therefore, in the opinion of the NIK, there is a significant risk that the amount of aid granted was sufficient that the company did not fall during the period of the Restructuring Plan, while too small to restore its long-term ability to compete in the market and provide the resources necessary to fund the development and continuation of the activities, which was the aim of state aid granted.
The Supreme Chamber of Control negatively assessed the activity of PLL LOT before getting aid. Conducted before 2013. Action in the restructuring of LOT were inadequate to both the dramatic situation in which there was a company, as well as the challenges posed by the market environment.
In addition to reasons beyond the control of the company, and related macroeconomic environment ( crisis in 2008.), changes affecting the airline industry (related mainly to the activities of the so-called. low-cost airlines) and delays in the delivery of aircraft B787 Dreamliner – it is clear that the situation in which he found himself LOT was affected mainly by the action of successive boards related the unrealistic planning of both the amount of revenues and costs. Impossible to make a reliable assessment of the impact of implemented corrective actions on the financial situation, and consequently led to the end of 2012. To a state in which the company was unable to repay maturing obligations without obtaining external financing in the form of state aid. Although since 2009 the company has continued to restructure and lowered costs, profit from core activities has not occurred for six consecutive years (since 2007.).
NIK negatively assessed the correctness of ordering services advisory and consulting services. The audit revealed numerous cases that do not use the internal regulations of the company, aimed at ensuring economic efficiency and transparency of their purchases. Irregularities disclosed in this area were widespread and systemic in nature, and the result – according NIK – with excessive freedom in conducting the purchase of such services and their settlement. Some service contracts with a value in excess of million, were concluded without carrying out the required tender procedure, based on the internal procedure. In addition, some of the provisions contained in the agreements with advisory did not hedge in a proper manner the interests of the company. The audit revealed the agreement, the provisions of which do not clearly determined the final amount of the cost of ordered services and thus prevented the company to exercise effective control contract costs.
The company does not respected or internal regulations concerning the collection and storage of contracts concluded with third parties. Found during the inspection deficiencies in the set of agreements concluded by the company indicate a serious negligence in terms of circulation and protection of documents related to the company initiated by businesses. Conducted inspection of the Central Archive Agreements have shown a lack of resources, the archives 17 of the 21 contracts, selected by the controllers NIK control. Finally, the agreement for which transmission is requested controllers NIK, have been by the company found and submitted to control with a delay of up 46 days in relation to the deadline.
In summary, NIK indicates that:
– supervision of the Minister of Treasury of the PLL LOT from the formal was consistent with those of the Ministry of Treasury rules and granted to the minister of public aid allowed to save it from bankruptcy. NIK notes, however, that in the period before the granting of public aid or appointed by the Minister of teams and committees, or were nominated by the Minister of the members of the Supervisory Board of LOT Polish Airlines does not enforce or failed to protect the board from real plans to restore the profitability of the core business. The annual plans of economic-financial companies on the one hand the cost of each were underestimated, and on the other determined unrealistic assumptions with respect to revenue, which resulted in the constantly growing demand for extra cash.
– representatives of the Treasury in the Supervisory Board they should require the presentation of the pessimistic scenario, which would indicate a need to carry out restructuring measures in the event of a lower than expected revenues or incurring higher operating costs. Meanwhile admitted to a situation where the management of the company as a rule adopted a mechanism based on the financing of long-term losses from the core business and the rescue of liquidity through the sale of assets. Since 2009. Was sold assets unrelated to the core business in the amount of 1 313 million zł. As at the end of 2012. Remained of the more than 300 million zł due debt, virtually without a suitable disposal, pledge or collateral assets. As a result, the company has been brought to a state of insolvency within the meaning of the Law on Bankruptcy and Rehabilitation, and only the good will of the creditors (who have not filed bankruptcy filings), and the owner, LOT Polish Airlines owes its continued existence.
– outside independent of the company’s external factors, a large impact on the situation at the end of 2012. was a lack of consistency in the implementation of the strategy. In most cases, the board was not obliged to submit the settlement of execution in force before the implementation of the Restructuring Plan strategy. In the opinion of NIK, such a settlement would allow the acquisition of knowledge about the causes of failure to obtain the intended effects and find solutions for improvement in the reality of the planning goals for the company. Failure to analyze the causes of failure to attain anticipated in individual documents parameters considerably difficult to assess the reliability of the action of both the supervisory board and the board of LOT Polish Airlines.
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