RIGA - This is the first in a two-part report on the rapid changes in the airlines industry and what they mean for the city of Riga.
The eagles have landed. On Aug. 30 the low-cost airline EasyJet announced that it would start flying from Berlin's Schoenefeld Airport to Riga on Nov. 18. Coming hard on the heels of the announcement that its great rival RyanAir will be flying to Riga from London's Stansted, Tampere and Frankfurt Hahn from Oct. 31, all the signs seem to indicate that Latvia is, in the words of Transport Minister Ainars Slesers, facing "a revolution in the airline industry."
Slesers' stated aim is to double passenger turnover at Riga International Airport to 2 million per year by the end of 2005, with a final goal of 5 million to 6 million per annum by 2010.
There is no doubt that the arrival of the low-cost airlines is the most important development in the Latvian tourist industry for years. Riga has now gained a major advantage in the quest to become the Baltic hub (although EasyJet is opening routes to Tallinn from Stansted and Schoenefeld in late October), and the reason is simple: from Nov. 1 this year, the Latvian government will abolish the passenger departure tax of 7 lats (10.5 euros) per person and reduce arrivals taxes by up to 80 percent.
According to Dzintars Pomers, president of Riga International Airport, this means that the largest carriers - those handling 250,000 passengers or more per year - will pay no more than 3 lats per passenger, "the cheapest price in Europe."
For the airlines concerned, it's a windfall. But whether it will spark a revolution is another question.
Bertolt Flick, president of airBaltic, is categorical. "Nothing revolutionary has happened. The real revolution was two years ago when we foresaw the entry of the so-called low-cost operators into the market and adjusted our fare structures accordingly," he said. "All the major airlines fly here: BA, Lufthansa, Czech Airways. RyanAir is just one more airline in an already competitive market."
Tom Anderson, manager of British Airways in the Baltics, is similarly bullish.
"There's nothing tragic for BA in [the low-cost airlines' arrival]. Many people try the low-cost way once and never do it again. The only change is that there will be more choice for the consumer," he said.
The airlines have grounds for optimism. To take one example from the new EU states, EasyJet began flying from London to Ljubljana in May this year. The airline recently announced that it is on target to process 90,000 passengers per year.
Simultaneously the local carrier, Adria Airlines, announced increased sales for its London route. As Anderson pointed out, "The low-cost carriers aim at different categories of passengers, with different travel needs. What they provide is more publicity for their destinations. Low-cost air travel boosts the whole market."
But the low-cost carriers' business model brings its own challenges. For example, the low-cost airline Buzz axed its route from London to Helsinki in 2001. The main factor underlying this decision: the simple fact that Helsinki is three hours' flight from London. Low-cost airlines make their living by using one aircraft to make several flights per day. Committing that aircraft to a seven-hour round trip squanders its competitive edge.
RyanAir CEO Michael O'Leary has declared that the Irish airliner is in Riga for the long haul. But in this world of soaring oil prices, the long haul may be less attractive than it seems.
More can be expected, perhaps, from the flights to Finland and Germany. German tourists are under-represented in Latvia, accounting for only 5 percent of total arrivals in the second quarter of 2004, and the marketing explosion sparked by RyanAir and EasyJet is unlikely to decrease their numbers.
Finns are better represented, constituting 6 percent of arrivals over the same period. Both Flick and Pomers doubt the viability of the Tampere-Riga route, but Latvia's charms and charges may yet work their magic.
However, even these routes deserve a caveat: Riga is an unlikely destination for sun-starved northerners hunting a winter getaway, and the logic of starting budget flights here in November is open to question.
Thus the projected boom in passenger numbers seems likely to prove elusive. If it does, Riga's airport and the Latvian taxpayer may have cause to rue the government's generosity.
On the other hand, the low-cost airlines may deliver, and this implies problems of its own. Riga International Airport's current capacity is 1.5 million passengers per year, well above its projected 2004 figure of 1 million. However, if Slesers' dreams come true, the number of passengers processed by the end of next year will be 2 million.
Plans have already been laid to extend the terminal, bringing it up to that capacity by 2006, and as long as this work is finished on time, the airport should handle any surge. If delays occur, and passenger numbers rise as predicted, travel through Riga may become a torrid experience.
There is one truly revolutionary aspect to all this. According to Pomers, of the 1 million extra passengers expected to arrive next year, 80 percent will be budget travellers. They will find a city with two campsites, a scant half-dozen hostels and an uncharted public transport service. Alarms are already sounding in the Latvian press concerning the city's lack of facilities for independent travellers.
Whatever measures the local authorities take, they are unlikely to make themselves feel before the summer. The revolution has arrived. Whether Latvia is ready for it remains to be seen.