RIX: aiming for the skies

RIGA - Riga International Airport seems to be the only business showing growth, and not losses, in Latvia nowadays. It’s modern (it even uses Twitter) and has ambitious plans for development (capacity will be increased to 12.7 million passengers by 2013).

Riga International Airport is the biggest in the Baltics and one of the fastest growing in the EU. Built in 1973 and renovated in 2001, the airport has seen a steady increase in passengers in recent years. In 1998, it handled 550,000 passengers and that number has gone up every year, reaching 4,066,794 passengers in 2009, which is 10.2 percent more when compared to 2008. Despite the complex situation in the global aviation industry, this year is expected to bring yet more good news - a 15 percent increase in the number of passengers. A few years ago a new terminal was completed, and the plans for development don’t stop there. National air carrier airBaltic has ambitious plan to build another one by 2013. And ex-Minister of Transport, Riga Deputy Major Ainars Slesers (Latvia’s First Party/Latvia’s Way) is still sure that a 30 million passenger annual capacity per year is not a dream, but a real possibility in the future.

The first serious refurbishment of Riga Airport was made in 2001, which made the airport modern, yet compact and comfortable. A new terminal in 2007 followed, now mainly used by low cost airline Ryanair. Now with airBaltic’s plans for a new terminal, Riga Airport could reach a turnover of 12.7 million passengers per year.
Slesers seems to be the godfather of Riga Airport. In 2004, he brought Ryanair here, which increased the number of flights and passengers dramatically. And just a few days ago he signed the protocol of intent for an exhibition center at the airport, which will be signed by representatives of Frankfurt am Main councils during the MIPIM 2010 real estate exhibition in Frankfurt, Germany. The protocol of intent states that both city councils give their approval to providing support for the planned trade fair, congress and exhibition center project in Riga. Investment in the construction of the center could come to 80 to 100 million euros.

Slesers is sure that Riga, with the passage of time, could repeat the success of Frankfurt and that the exhibition center could bring us a huge number of visitors, as it did for Frankfurt.
Recently, the fly in the ointment for Slesers became the decision by the government to cancel the tender for the project of enlargement of the airport, worth 300 million euros, which was started when Slesers was the minister of transport. The explanation of the decision made was short - the project was too ambitious and Riga Airport could serve not more than 10 million passenger.

As Slesers commented to daily Subbota after the government decision, “I attracted solid investors for airport enlargement, who were ready to invest 300 million euros and give work to thousands of builders, but our government burned up the project. They tend to destroy all my work.”

However, as Slesers told LETA, he is sure that Riga Airport is capable of servicing 30 million passengers in the future, according to the previously planned development project. However, he admitted that the current airport development model already approved by the government is better than nothing.
As already mentioned, by 2013, the plan is to expand the capacity of Riga International Airport to 12.7 million passengers a year.

AirBaltic, which earned record profits of 20 million euros last year, together with the Turkish consortium TAV Havalimanlari Holding (TAV), plans to construct a new passenger terminal, which would cost approximately 92 million euros.
As airBaltic president and CEO Bertolt Flick said in an official press release: “The infrastructure of the Riga International Airport has already reached its design capacity limits, and so a new terminal is acutely needed to accommodate the growing passenger numbers.”  He is sure that beyond 2011, further development and any increase in passenger numbers at the Riga Airport will not be possible without a new terminal.

AirBaltic plans to build a terminal with floor space of 58,000 m2 – one which will be able to handle up to 15 million passengers a year. Investments will come from the private sector, and the project will require no funding or guarantees from the state. It’s planned that discussions with international banks on necessary financing for the project could be concluded by this summer.
The plans to increase passenger numbers are based on developing the transit business and making Riga Airport the hub between East and West. Already now airBaltic has many flights aimed at bringing transit passengers through Riga. Recently, flying from the small Finnish city Oulu to Riga, I was surprised that the flight was full, and 90 percent of the passengers went straight to the gates, not to the exit to the city. Another big hope is for passengers traveling to the Caucasus – Georgia, Erevan, etc., which use Riga as a transit city going to other European cities. 

However, the Cabinet of Ministers new plan for transport development was accepted and announced by the Ministry of Transport, though the plan shows the real figure of passenger increase will be much lower. It’s planned to increase the passenger count to 6.8 million passengers by 2013. AirBaltic also plans to develop its cargo business with its new BalticCargo operations. The airline has acquired full ownership of a cargo business at Riga International Airport, and will operate it under a new BalticCargo brand.

As Flick said, “Latvia is currently the fastest growing passenger aviation market in the EU. In our view, the cargo market has the potential to grow in a similar fashion, given Riga’s favorable geographic location and the airport’s expanding network of flights.”

Located on the northeastern edge of the European Union, Riga is the region’s closest airport to China. Riga already has well-established aviation cargo flows to and from Russia and the CIS, Scandinavia, Western Europe, Asia. The plans have a strong base – in February the airport handled 933 tons of cargo, which is 43.4 percent more than the previous year.
However, not everything is so bright and positive. Recently, another fly in the ointment became the decision of low-cost air airline Ryanair to build its base in Kaunas, not in Riga as was initially planned.

Ryanair made its decision based on discounts for amounts offered by Kaunas airport, which were much lower than in Riga. The decision not in favor of Riga Airport was made also because of the Latvian Competition Committee case, opened about discount amounts the airline was receiving at Riga Airport. The extra discount was canceled when Slesers left his minister of transport position.

As a result, Kaunas airport will get 50 new flights, 140 million euros of investment and 1,000 new jobs. Now even if Ryanair decides to build the base in Riga, we will share its passenger traffic with Kaunas airport.  The decision of Ryanair also has another side – the company benefits from an absence of competition in Kaunas.
Recently, Ryanair learned of another strong competitor in Riga – low cost airline Wizzair, which started its flights from Riga on March 13. Wizzair offers flights from Riga to London, Turku and Oslo starting from 17 euros one way. Wizzair is the third company to come to Riga Airport in 2010. the Belarusian airline Belavia started its flights from Riga to Minsk, and Romanian airline Tarom started its flight to Bucharest this year. All together, Riga Airport today can claim 79 direct destinations, serviced by 17 different airlines. By 2013, it’s planned to welcome five new airlines and to start 20 direct flights from Riga to new destinations.