FlyLAL mulls taking competitor airBaltic to court

  • 2008-04-23
  • Staff and wire reports
VILNIUS - Lithuania's dominant air carrier, FlyLAL, has said it might file a motion against its Latvian competitor, airBaltic, for violations of competition rules at the Riga and Vilnius airports.
Gediminas Ziemelis, a partner and shareholder of ZIA Valda, one of FlyLAL's owners, told the Baltic News Service that the company's lawyers were preparing documents for litigation.
FlyLAL is accusing airBaltic of dumping. Tickets for airBaltic flights from Vilnius are lower than analogous flights from Riga, which essentially means that airBaltic is subsidizing its Vilnius routes with the significant discounts it receives in Riga, FlyLAL officials claim.

"If the court acknowledges that the discounts are distorting the market and violating competition legislation…the companies that suffered losses as a result of that might demand damages from Riga Airport," Ziemelis told the Baltic News Service.
He claimed that Latvia's competition watchdog had also ruled that the discounts granted by Riga International Airport are a breach of competition laws.
The Latvian carrier, which is majority owned by the state, receives discounts of up to 80 percent on passenger tariffs at Riga International Airport due to high passenger volumes. The discounted tariffs were introduced in 2004 in an effort to transform Riga into a regional transport hub for air travelers.
However, criticism on the discounts has come from all quarters 's including competing airlines, some Latvian government officials and bureaucrats in Brussels 's and a Latvian court is set to review the discount system later this year.

"Essentially, airBaltic has been competing with us in the Lithuanian market at the expense of its Latvian passengers," Ziemelis told the Dienas Bizness daily.
"How can it be that airBaltic's prices in Lithuania are lower than in Riga, even though in Riga airBaltic receives significant discounts, whereas in Lithuania it does not?" he asked.
Ziemelis said that the company would probably make a final decision on whether to litigate in about three months.

AirBaltic CEO Bertold Flick acknowledges that the airline's tickets for Vilnius-based flights are cheaper than those of FlyLAL, but he says the difference boils down to the different cost levels.
"It seems to me that the true reason for the complaints from FlyLAL is simply because our prices in Vilnius are indeed lower than theirs. The accusation of dumping is nonsense, particularly considering that for several years airBaltic, unlike FlyLAL, has operated with a profit," Flick told the Telegraf daily.
Flick suggested FlyLAL was frustrated with the fact that many Lithuanians prefer to drive to Riga and fly with airBaltic rather than use FlyLAL's services.

In 2007 airBaltic boosted its market share at Vilnius International Airport to 36.1 percent. FlyLAL ranked second, with its share declining from 28.7 percent in 2006 to 27.6 percent.
In all, airBaltic flew slightly over 2 million passengers last year, up 41 percent year-on-year. The company boasted a 45 percent market share at Riga International Airport, significantly ahead of Ryanair, which had a 25.3 percent share.
FlyLAL said it would aim to carry 1 million passengers this year and restore its leading position on the Lithuanian market.

AirBaltic is 52.6 percent owned by the Latvian state and 47.2 percent by the Scandinavian airline SAS.