FlyLAL battles airBaltic in court

  • 2008-10-08
  • By Adam Mullett

Lithuania accuses Latvia of reaping unfair profits

VILNIUS - Acrimony between airlines airBaltic and flyLAL reached new heights as the two companies fought it out in a 199.83 million litas (57.97 million euros) court case over price dumping.
A Lithuanian regional court has frozen some of airBaltic's property prior to the court battle. flyLAL hope to claim damages for money they have lost as a result of what they claim are illegal business practices by their rivals.
airBaltic's Vice President and Lithuanian chief Tadas Vizgirda told The Baltic Times that the accusations are ridiculous and that they are appealing the decision made in the Vilnius Regional Court.
Vizgirda said the ruling was an embarrassment.

"The fact that a Lithuanian judge ruled to freeze our assets in another country, the property of the Latvian government, that was a ridiculous action," he said. "It is embarrassing to Lithuania that a judge would do this."
flyLAL has accused airBaltic of receiving an 80 percent discount on airport fees in its base port Riga, the windfall of which has been used in reduce prices in Lithuania to push the Lithuanian company out of its home market.

"The Latvian government was subsidizing airBaltic through Riga airport and they have been getting quite handsome profits in their Latvian operations and they have been using those profits to fund their activities here in Lithuania 's they are price dumping. They have been doing pricing which is totally unreflective of any economics of the airline industry and we believe that the whole idea of that dumping is to force us out of the market," flyLAL CEO Vytautas Kaikaris told TBT.
The Latvian government, which owns both Riga International Airport and 52 percent of airBaltic, stands to foot the bill should flyLAL's action be successful.

Vizgirda said that airBaltic was not the only company to have received discounts from Riga International Airport.
"This is a ridiculous accusation that they have made 's Ryan Air, KLM and AirFrance all get the same discounts at Riga airport," he said.
Kaikaris said that there was no positive work being done by airBaltic and that they were just undercutting them on price once the route had been established.
"They came and started a flight to destinations where we already had a route, like London or Milan or Paris and they came, would offer their flights there and via price dumping, we had to say that it wasn't possible to operate to this destination because it was totally uneconomical," he said.
Meanwhile CEO and President of airBaltic, Berthold Flick, said the company would continue to work in the region as normal.

For the winter however flights from Vilnius to Hanover and Oslo have been cancelled and re-routed through Riga.
Vizgirda denied the cancellations are related to the lawsuit and that they could eventually leave Vilnius in preference to Kaunas, which they are eyeing as their Lithuanian base.
After the initial ruling, Flick responded angrily saying the ruling could not be enforced.
"At this time, airBaltic has received no official document from Lithuania's court institutions to confirm that this is so."

"The court ruling vis-a-vis airBaltic and the Riga International Airport cannot be implemented in Latvia. Before handing down such a ruling, the court surely must have solicited the views of airBaltic and the airport. According to a ruling of the Court of Justice of the European Communities, a court ruling cannot be applied in another EU member state if the relevant parties are not heard. In this case that applies to airBaltic and the Riga International Airport, and a ruling in Lithuania cannot have legal effect in Latvia."
A source from within the Lithuanian court system explained that the ruling to seize property was a safety measure whereby the assets are frozen until the case is over to avoid sales of relevant property in an effort to evade prosecution.

"The ruling in Vilnius apparently means that the judge believes that the Republic of Latvia would not be able to make payment if the court were to rule that monies are to be collected," Flick said.
"flyLAL apparently believes that it is normal "business" to attack the reputation of airBaltic and the Riga International Airport. Instead, the company has blackened its own reputation and that of the Republic of Lithuania, and this may have a seriously deleterious effect on the investment environment in that country," Flick added.

Lithuania's Ministry of Foreign Affairs weighed in with a note to the Latvian government asking for calm. They are worried about an escalation.
"We are entirely convinced that judicial proceedings of this dispute should not impact on good neighborly relations between Lithuania and Latvia, or hamper successful and intensive economic cooperation between the two countries," The ministry said in the letter.