Lietuvos Avialinijos (Lithuanian Airlines) has demanded an explanation as to why the government has begun handing out economic privileges to discount airlines.
The company said it has asked Economy Minister Kestutis Dauksys to explain the state's position vis-a-vis Lithuanian Airlines, which operates under the new name flyLAL, and budget airlines such as Ryanair, that the government has been trying to entice.
"If we had the privileges that the low-cost air carrier has, prices of our services would decline further," Gediminas Ziemelis, a member of flyLAL's management board, said in reference to Ryanair, the discount Irish carrier that began flying to Riga a year ago.
He said that the government was distorting market conditions by spending large sums on "doubtful" advertising and getting more expensive services for the money.
FlyLAL, which was recently privatized, does not rule out taking its gripes to the Competition Council.
Ryanair, which recently began flying to Kaunas, is to receive 362,500 litas (105,100 euros) annually for advertising trips to Lithuania. Ziemelis said that Lithuanian Airlines has been advertising trips to the country free of charge for 14 years and hasn't received anything in return.
FlyLAL applies the same pricing principles as low-fares airline - i.e., the earlier ones buys a ticket, the lower the fare. This makes the government's apparent favoritism even more dubious, flyLAL officials said.
FlyLAL posted losses of 9 million litas (2.6 million euros) last year but expects to break even this year.
The airline held a 49.9 percent share of regular flights at Vilnius Airport and 50.1 percent of the country's passenger market.
The company is 100 percent owned by LAL Investiciju Valdymas, which in turn is owned by Fima, a local electronic and engineering solutions firm.