RIGA - Latvia's Competition Council announced on Nov. 23 that it would abolish the current tax discount system at Riga Airport. Competition Council representative Maris Gorbunovs said the council had concluded that the airport's discount system carried features of abuse.
"The airport is imposing different tax discounts on equal airport services. Due to the airport's tax discount system, there are considerable differences in expenses for competing airlines and unequal opportunities for launching new and competing routes," Gorbunovs said.
Riga Airport's current price policy was made on Nov. 1, 2004, and envisaged setting airport duties for air companies based on the number of passengers carried. The lowest discount is 10 percent for 25,000 passengers carried, while the largest discount is 80 percent for 250,000 passengers carried in a year's time.
The airport has to implement the decision within the next 90 days and objections can be submitted 30 days afterward before the Administrative Court, Grobunovs said.
The Competition Council's actions were a result of EU pressure and complaints about the current system from Austrian Airlines, Czech Airlines, Finnair, Lufthansa, KLM, and British Airways, which just recently announced that it would stop serving the Riga market altogether.
Earlier this fall, the Latvian daily Diena reported that the European Commission had asked authorities to revise the airport's tax discount system. In a letter to the Transport Ministry's aviation department director, Arnis Muiznieks, the commission said the state had to be very careful when regulating relationships with the private sector, and that they have the responsibility to abolish regulations that contradict EU competition rules.
Transport Minister Ainars Slesers earlier said that if the Competition Council decided to abolish the airport's tax discount system, he would propose changing the council's administration.
Equally unhappy about the commission's decision is Ryanair representative Wilhelm Hamilton, who told the Latvian business daily Dienas Bizness that any change in the status quo could jeopardize future airport expansion plans.
"Any kind of rise in prices at Riga Airport will force us to reconsider our plans," Hamilton told the daily.
The representative threatened not only to rethink already confirmed expansion plans, but also to reconsider Riga's role in future Ryanair expansion plans.
The other company with enough passengers to receive the 80 percent discount is Latvia's national carrier, airBaltic, which currently has no plans to take their business elsewhere.
"We will continue our work no matter what happens," airBaltic spokeswoman Vija Dzerve told Dienas Bizness.
All other airlines operating at Riga Airport have to compete with a 10-20 percent discount.
Last year, Riga Airport served 1.88 million passengers, up 77.1 percent from 2004, and this year the airport plans to serve 2.5 million passengers. Riga Airport is fully owned by the state.
