RIX again considers offering tax breaks

RIGA - Riga International Airport might again introduce tax breaks that it previously had to lift, reports Nozare.lv. Riga Airport Chairman of the Board Krisjanis Peters hasn’t ruled out such a possibility. The Competition Council’s chief, Ieva Jaunzeme, also said that moderate and economically justified tax breaks could be reintroduced at the airport, and that talks about the matter were already under way. Asked what tax level breaks could be appropriate, Jaunzeme said around 30 percent would be about right.

The Competition Council will not oppose tax breaks if they are commensurate and economically justified, said Jaunzeme. The past dispute with the airport was due to the fact that no information had been provided proving that the tax breaks created any favorable economic effect. Furthermore, if tax breaks reach 80 percent and more - as they were before the airport had to lift them - this is unfair to other airlines.

The Competition Council ascertained, after receiving a complaint from six airlines - Austrian Airlines, Czech Airlines, Finnair, British Airways, Deutsche Lufthansa AG and KLM Royal Dutch Airlines - that the airport’s tax breaks for the national airline airBaltic and the Irish low-cost carrier Ryanair had resulted in unfair competition. The State Audit Office, in turn, concluded that as a result of the tax breaks, the State budget failed to collect more than 11 million lats (15.7 million euros) in 2007.

Since the tax breaks for airlines were lifted, airport tax has been the same for all the airlines flying to and from Riga Airport, regardless of their passenger turnover figures.

It cannot be ruled out that the reintroduction of the tax breaks could be due to Ryanair’s uncertain future plans in Latvia. Peters declined to comment, whereas Jaunzeme said that there was no direct connection between the development of an airline base in Riga and the airline’s passenger turnover, on which the amount of the tax breaks depends.
At the beginning of May, Ryanair opened its first base in Central and Eastern Europe in Lithuania’s city of Kaunas. Ex-Transport Minister Ainars Slesers (Latvia’s First Party/Latvia’s Way), who was the transport minister at the time the tax breaks were adopted at the Riga Airport, has said that Kaunas Airport currently does not charge anything for flights to and from the airport.

Peters said though that talks with Ryanair on the development of the airline’s base in Riga continue. “Our letters are strictly confidential, but I can safely say that we were exchanging letters about the conditions back in April,” said Peters. “It has been wrongly assumed that Ryanair will have two planes at its base in Kaunas, and that Ryanair leaves Riga. It is not so, Ryanair still has more flights from Riga than Kaunas will ever have, I believe. If we could accept the conditions they offer, then we would have the base, meaning that planes stay here at night, tomorrow already,” said Peters, adding that eventually such a base would be developed in Riga.

Back in February, when Ryanair announced the development of the base in Lithuania, Ryanair representatives told the newspaper that the talks still continued and the airline was not planning to abandon Riga, because a large number of flights were operated out of Riga, and passenger flows were increasing each year. At the same time, Ryanair did not deny that the cancelled tax breaks were what the airline had been unable to agree on with the Riga Airport, and that Ryanair would only expand its operations in Riga if the cost level in Riga would be in line with the airline’s demands.

If tax breaks are reintroduced, the airport would have to cover them from its earnings, and this is closely connected to the construction of a new airport terminal, said Jaunzeme. Taking into consideration the current passenger numbers at the airport, the construction of a new terminal by airBaltic would enable the airport to attract new airlines and more passengers. This means that, besides airBaltic and Ryanair, which account for the bulk of the airport’s passenger turnover, the planned tax breaks could be offered to newcomers to the airport, said Jaunzeme.

In the meantime, Vilnius Airport currently offers airlines practically the same tax breaks as Riga Airport used to have a few years ago. “The example of Vilnius is symptomatic - we lifted our tax breaks, and they introduced theirs just two weeks afterwards. Here it is legally impossible to do that without support from the state,” said Peters.