Unions oppose LOT Polish Airlines savings plan

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In November 2004, trade unions at LOT Polish Airlines initiated a collective dispute with the airline's board of directors, triggered by a cost-cutting plan that will involve job losses. The unions have also called for the company's directors to be dismissed.

LOT Polish Airlines (Polskie Linie Lotnicze LOT SA) is Poland’s national air carrier, first established in the 1920s. Since the early 1990s, the airline has been undergoing profound restructuring and modernisation - the replacement of its entire fleet with Boeings and other Western-built aircraft being only most obvious manifestation of a highly complex process. To date, the changes at LOT have proceeded in a relatively peaceful atmosphere. However, in November 2004, trade unions active within LOT, as well as 12 further union organisations from its subsidiaries (which number close to 20), embarked on a collective dispute with the airline's board of directors.

The conflict was precipitated by the unveiling of a savings plan. As recently as 2002, LOT posted a year-end profit of PLN 150 million; by 2003, however, the airline was PLN 31 million in the red. LOT’s recent difficulties are the result, among other factors, of ever-stiffer competition from the budget airlines, whose share in the market for passenger carriage is set to continue expanding. Accordingly, the implementation of a savings plan is seen as a necessity for LOT. The programme is focused on cost reductions, to be achieved first and foremost by way of workforce reductions. This will not be the first time that LOT scales back employment; it currently has approximately 3,800 employees, less than half of its combined workforce in the early 1990s.

The unions maintain that the savings plan proposed by the chair of LOT’s board will be of little use in ensuring profitability. The chair of the National Polish Airlines LOT Trade Union has levelled the following charges against the airline’s chief executive:

• a lack of ideas with regard to generating revenue;

• excessive emphasis on savings measures;

• purchases of new airplanes which, in the view of the unions, place an excessive burden on the company’s balance sheet and threaten to push it into bankruptcy; and

• opening the airline to political pressures by offering preferential fares for leading politicians and by awarding orders to companies not affiliated with the LOT group.

To summarise these various allegations, the unions charge that the chair of LOT’s board is not competent to manage the airline’s operations, and they are calling on the supervisory board to dismiss all the directors. The chair of the supervisory board has responded that there is no basis for such a decision; he also maintains that, while a plan for generating more revenue certainly exists, cost reductions continue to be an overriding priority. Investing in LOT’s fleet of aircraft - the supervisory board argues in defence of the directors’ policies - is necessary in that 2006 will bring the expiry of lease contracts on some of the planes presently in use. The pricing preferences, finally, have not come to the supervisory board’s attention.

At this stage, there is much contradictory commentary, and it is difficult to predict the turn which the nascent dispute may take. On the one hand, many union activists appear to oppose any outright strike for fear that it may cause the collapse and bankruptcy of LOT; others, however, do not rule out industrial action.