RIGA - A capital infusion of up to 15 million euros by the Latvian government into its national carrier airBaltic may be on the way as the airline expects to report, in about two weeks, large operating losses for last year.
Unpublished reports have airBaltic running at an operating loss of 30 million lats through 2008, according to information by Airline Industry Update, reports news daily Dienas Bizness.
AirBaltic Corporate Communications Vice President Janis Vanags says that the company was operating last year in the red, and that results will be released publicly by mid-August.
Vanags wouldn't say whether other investors are involved at this point, or are even currently being considered, though the Latvian government is reportedly considering the cash injection, which would be used for future development of the airline.
Airline analysts say that the weak performance in the industry last year was mainly due to fuel prices. Airlines entered into fuel supply contracts when the prices were still high, expecting to lock in before prices went even higher. Prices, after peaking last summer, however, began dropping, leaving airlines stuck with paying higher prices.
Other costs come into play in the airline industry 's financing costs for leased planes, maintenance costs, pilot and crew's salaries, though these aren't as volatile as the fuel costs.
Planes consume lots of fuel, it's one of their biggest expenses, on average consuming over 35 percent of an airline's operating costs.
Airlines are under increasing pressure to cut costs, as competition increases, the global economic crunch takes its toll on business and leisure travel, and recent health concerns see passenger numbers down.
Some Japanese airlines, for example, have been streamlining on-board service with lighter forks and spoons, to cut weight and save fuel. Two grams off each spoon on board may not sound like much, but in the long run is saving millions in fuel alone. A British airline removed old paint from its planes and repainted with a thinner layer, saving 400 kg in carrying costs. Passengers might not notice if curtains and carpets were a bit thinner, and lighter, or if the trolley was made of plastic instead of metal.
Airline president and CEO Bertolt Flick says that airBaltic "plans to finish this year with a profit," pointing to positive indicators including falling fuel prices. "The market situation is different now… We have also reshaped our business model to that of being a Transit Business Model," he added, which means that airBaltic is doing more transit flights using Riga as a hub, rather than an end destination.
Fuel prices on global markets are down by about 50 percent from last summer's peak.
The airline carried almost 2.7 million passengers in 2008. For June 2009, the company recorded 3 percent more passengers as compared with June 2008. This on 9 percent fewer flights, for the same period, reflecting a jump in the load factor to 72 percent, up by 8 percent year-on-year.
AirBaltic recorded 2007 revenues of 158.5 million lats (226.4 million euros), with profits of 1.5 million lats. The Latvian Government controls 52.6 percent of the company's shares, with management owned Baltic Aviation Systems owning 47.2 percent.
