RIGA - AirBaltic announced last week that it was planning "to develop at a slower pace" after seeing its passenger turnover skyrocket 76 percent in 2005, a result of the company's aggressive expansion strategy and Riga's transformation into a regional airport hub. AirBaltic, which is majority owned by the state, carried 1.04 million passengers last year, opening seven new routes from Riga and increasing its fleet by three planes.
However, the company's dominant position in Riga has disappeared as operations of Irish rival Ryanair, which began flying to Riga in October 2004, reach full swing.
AirBaltic's revenues reached 84.6 million lats (120.4 million euros), an increase of 64 percent year-on-year. The company finished the year with a loss, though operational profit amounted to 9.7 million lats, up 44 percent compared to 2004 and the highest ever for the airline.
Describing the company's growth as "remarkable," airBaltic President Bertold Flick told a press conference last week that the airline would have posted earnings of 1.4 million lats if it had not incurred costs connected with returning an Avro plane that it had been using under a lease agreement. Otherwise, the company is bullish about its future prospects, but wants to proceed at a more even pace.
"It's not good that the number of passengers grows by some 75 percent each year," Flick said.
Still, he said the airline was targeting 1.5 million passengers in 2006 and was preparing to launch 10 new routes. Its long-term goal will be to continue promoting Riga as a transit hub between the West and the former Soviet Union. In May, for instance, the airline will introduce direct flights to Tbilisi, Georgia. Baku, Azerbaijan, will soon follow.
The company currently operates 25 routes from Riga and 10 from Vilnius, where it began operations in 2004 and has made remarkable progress in whittling away at the market share of Lithuanian Airlines, the dominant carrier there. Last year airBaltic accounted for one-fourth of passenger turnover in the Lithuanian capital, up from 10 percent in 2004.
"Our hub in Vilnius is developing very positively and is already profitable. In the future, we are planning to expand our fleet there and add more routes to the network," he added.
But the competition isn't sitting still. Despite its stellar performance, airBaltic has seen its share of overall passenger turnover at Riga International Airport fall dramatically on the heels of fierce competition from discount airline Ryanair.
If in 2004 airBaltic handled every other passenger in Riga, then last year it accounted for 40 percent. This share fell further over the January-February period of 2006, as airBaltic serviced 36 percent of the Riga air passenger market and Ryanair 32 percent.
Third place in the two-month period was occupied by Dutch KLM, with 4.5 percent of the market.
Flick said a high market share wasn't an end to itself and that the company wanted to retain an approximately 40 percent share of the air passenger market.
To compete with the low-cost companies like Ryanair and Easyjet, airBaltic launched a one-class ticketing model on four selected routes. The service will apply to flights to Bergen, Hamburg, Helsinki and Oslo. Ticket prices will start from 5 lats, excluding airport taxes. "Taking into account current trends in the air transport market and passenger criteria for airline choice, which emphasize price, destination and time, we are introducing this service model, with no business class," said Flick. "Evaluating our expenses' structure, we can also be called 'low-cost,' and that's why we'll be able to offer competitive prices to our customers."
New routes are also seen as a key to long-term success.
"Adding these cities to our network of direct destinations, we are continuing to implement our strategic plan of performing as many direct flights as possible and furthering Riga's development as an important aviation transit hub between East and West," said Flick. Looking across the Baltics, the combination of discount airlines, one-way tickets and aggressive expansion has placed Riga far ahead of Vilnius and Tallinn in terms of passenger turnover. Much of the credit for the accomplishment goes to Ainars Slesers, the former transport minister who resigned earlier this month.
"Cheap airlines made other companies decrease prices for tickets and allowed the number of new direct routes to increase," Slesers recently told The Baltic Times. "As a result, Riga International airport became a dominant flight center in the Baltics and lead to the successful state and tourist industry development."
Last year airBaltic hired 200 more employees, bringing the company's total workforce to 738.
