RIGA - The CEO of Ryanair, one of the world's fastest growing airlines, has announced that the company was prepared to build a $300 million technical service center in Riga for its growing fleet of planes, but that first Latvia's government needed to invest in a major overhaul of Riga International Airport.
Michael O'Leary, speaking to reporters on Feb. 7, acknowledged that Riga's airport was the fastest growing in the region 's it served 2.5 million passengers in 2006, up 33 percent from the previous year 's but that it still had to double passenger volumes before Ireland's Ryanair could set up a permanent base in Latvia. And that, he stressed, would require hefty investments.
He said that when Ryanair handles 2.5 's 3 million passengers at Riga Airport the airline can consider opening up the technical center.
Last year Ryanair handled nearly 665,000 passengers at Riga International Airport, which amounted to a 26.7 percent share of all passenger turnover. This year the carrier hopes to service some 800,000 passengers.
O'Leary has a powerful ally in Ainars Slesers, Latvia's transport minister and leader of Latvia's First Party. Slesers, who held talks with O'Leary last week, harbors ambitious plans to transform Riga Airport into the premier regional hub connecting Eastern Europe with the East.
Previously he stated that the long-term goal was to boost passenger numbers to 15 million, a notion that elicits skepticism from many corners. Still, the indefatigable Slesers is not the type of person who takes "no" for an answer.
"I would certainly propose the Transport Ministry's initiative on Riga as a center of international flights. We see that there are large changes in many European airports taking place, and we have to compete in the market," the minister said last week.
In order to accomplish that, Slesers said that 500 's 600 million lats (710 's 850 million euros) would have to be plowed into the airport. Approximately half that sum would be needed for a new runway, and the remainder for building a new terminal.
"There's no other way," said Slesers. "Otherwise we will have to stop launching new routes because we will not be able to serve the airlines." In that case, Riga Airport will go the way of most other regional airports and simply function as a terminal for locals only, the minister said.
Krisjanis Peters, a former transport minister who was recruited recently by Slesers to manage Riga Airport, said there are two financial models that could be used in developing the airport: state funding, or a public-private partnership. Slesers is expected to approach the government with a proposal in March.
Still, the government might not share the same enormous appetite for expansion as the Transport Ministry. There is no shortage of major infrastructure projects needing funds, including a proposed nuclear power plant in Lithuania that would replace the ageing plant in Ignalina. Latvia has already expressed its commitment to that project, which would cost as much as 4 billion euros.
Meanwhile, the government will also want to see how a row between the Transport Ministry and Latvia's Competition Council pans out. In November the council ruled that a system of discounts for large airlines 's particularly Ryanair and airBaltic 's were in violation of competition regulations. Though the ministry has appealed the decision, there is a chance it could still lose the case.
It is also unclear how the bargain carrier Ryanair, which began launching flights to and from Riga in October 2004 thanks to the discounts, would react if the discount system is scrapped. While the airline might not pull out of Riga, its goal of handling 2.5 's 3 million passengers would be dealt a severe blow.
As O'Leary said, there are 15 airports in Central and Eastern Europe that are competing to be the one to house Ryanair's future center of operations, which would employ 200 and service some 30 routes, the CEO said. Currently Ryanair flies to seven destinations from Riga.
Last year Ryanair, which was created in 1985, carried 42.5 million passengers on 436 routes in 24 countries.
In Riga, airBaltic continues to dominate, handling just over 1 million passengers in 2007, or 40 percent of all turnover at the airport.
