RIGA - AirBaltic president and co-owner Bertolt Flick explains away his airline's 27.8 million lats' (39.7 million euros) loss last year by claiming the company was locked into high priced fuel purchase contracts entered into by its former shareholder, Scandinavian airline SAS, reports news agency LETA.
Flick said "Our losses last year are very close to the sum of money that was overpaid for fuel. We could do nothing as it was the SAS holding company that had signed the contracts. The overcharge was colossal because we use around 110,000 tons of fuel annually; its cost amounts to approximately 80 million lats." He added that the airline is poised to earn a profit this year.
Flick stressed that in a relatively short period of time - one and a half years - the company has managed to introduce radical reforms. The airline now focuses on servicing transit passengers, which allows it to register growth figures at a time when Latvia's gross domestic product is shrinking. Last year around half of its passengers were local residents, though now only about 10 percent of the total are Latvian residents.
The company's latest innovation, says Flick, was the decision to establish an Internet travel agency. "Our travel agency is just the first step that will start a revolution. I believe it is the most important thing that has happened to airBaltic over the last decade," he says, adding that the airline plans to start offering travel packages including airline tickets and hotel services that will be at least 20 percent cheaper than the ones offered by other Baltic travel agencies. The aim is to capture around 20 to 25 percent of both incoming and outgoing tourism in the Baltic States.
"There will be only two types of customers that won't use these services - the very rich, and those who are not aware of the agency," boasts Flick. He estimates that the total value of the Baltic market is currently around 600 million lats.
Transport ministers from Latvia, Estonia and Lithuania have agreed to examine again the possibility of establishing a joint Baltic airline. "The idea is not new, but requires an updated, business-based evaluation. In 1994-95, the possibility was discussed with SAS. Back then, Estonia and Lithuania rejected the plan, and as a result, SAS jointly founded airBaltic with Latvia," said Latvia's Transport Minister Kaspars Gerhards.
Gerhards and his counterparts Eligijus Masiulis from Lithuania and Juhan Parts from Estonia agreed that the first necessity is having all three countries involved. The three also reviewed the need to boost cooperation in the aviation field, for fair competition in the Baltic market and an exchange of information on each country's governmental support for airports and airlines. Currently sustainable aviation development has to be made a priority, and that is impossible without economically justified actions, fair competition and transparency, they stressed.
"Latvia is ready to discuss establishing a joint Baltic airline on the condition that Riga would retain its current level of influence in the air traffic sector," said Gerhards.
At the Nordic and Baltic Transport Ministers' Forum Gerhards stressed the importance of ensuring that all state support mechanisms in the aviation sector are clear and transparent. The minister noted that one of the first tasks he accomplished, upon taking the transport minister's job, was revising the tariffs at the Riga Airport. He said that the new tariffs would become effective as of Nov. 1 and would be completely transparent and in line with European Union regulations.
Masiulis said that setting up a joint Baltic airline remains only hypothetical for now. Before proceeding with the proposal, expert opinion should be heard and development prospects should be analyzed. However, it is clear that in such a small market as the Baltic states, cooperation would make much more sense than competition. "It was the harsh competition that forced the Lithuanian national airline into bankruptcy," Masiulis said.
Parts agrees that the main issue in the airline business is to work with fair competition principles. In his opinion, establishing a new state-controlled airline is not the best solution, however, he says that Estonia is open for further discussions. o
