RIGA - Lithuania's largest airline recently shocked the regional business community when it suddenly offered to buy a majority stake in airBaltic, Latvia's state-owned and SAS-controlled airline that is significantly larger in size.
FlyLAL also announced that it would launch flights from Riga Airport, the Baltic's largest and fastest-growing hub.
The offer is also odd given that Latvia's government in the near future has no plans to privatize the airline, which is currently undergoing a growth boom that appears will continue for some time.
Nevertheless, FlyLAL executives are confident a takeover of the Latvian competitor would benefit all sides.
"We have excellent experience in the privatization of airlines, as well as a well-developed infrastructure and financial capabilities. So it is our aim in the future to create a common, strong Baltic aviation sector that would provide top quality services," FlyLAL Group CEO Linas Dovydenas said in a statement.
A group of Lithuanian investors purchased the state's 100 percent stake in Lithuanian Airlines in 2005 and later changed the company's name. At the time of privatization the carrier was in dire financial shape, with debts of 70 million litas (20.3 million euros). Even Vilnius Airport threatened the company with litigation.
However, the company has managed to return most of the debt and turned a profit in April, Dovydenas stated in a letter addressed to Latvia's Transport Ministry.
FlyLAL earlier this year tried to buy Hungary's national airline Malev but lost to AirBridge, a company associated with Russian oligarch Roman Abramovich.
The company has also stated it would enter the Latvian market by launching charter flights from Riga in October. The move is a return thrust at airBaltic, which started launching flights from Vilnius in 2004 and has since become that airport's largest passenger carrier.
According to the latest figures, in the nine months of 2007 ending in September airBaltic's market share in Vilnius airport was 36 percent, while FlyLAL-Lithuanian Airlines trailed with a 27.2 percent market share.
FlyLAL has vowed to win back the leadership position in the market.
Transport Minister Ainars Slesers confirmed receipt of the letter, but a ministry spokeswoman said the ministry was not considering a sell-off of the airline, in which it controls a 52.6 percent stake.
Scandinavian Airlines owns the remaining 47.2 percent stake.
FlyLAL belongs to the FlyLAL Group, whose owners are three Lithuanian companies 's Fima (30 percent), ZIA Valda (30) and Sanitex (25).
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In the first nine months of 2007, airBaltic and Ireland's Ryanair flew the highest number of passengers to and from Riga airport, taking 44.8 percent and 25.3 percent of the total number of served passengers, Riga International Airport data shows.
Airbaltic served 1,060,842 passengers at Riga's airport over the period, while Ryanair carried 599,945 passengers.
Latcharter ranked third with 123,081 passengers (5.2 percent market share), while Dutch airline KLM followed with 83,997 passengers (3.5 percent).
In the nine months of 2007 Riga Airport served 2,367,902 passengers, a 26.5 percent rise year-on-year.
