BETTER RESULTS: Cost-cutting and fewer routes have helped cut losses.
RIGA - AirBaltic, Latvia’s state-owned airline, narrowed losses more than forecast last year after cutting costs and a better-than-expected Christmas season, said Chief Executive Officer Martin Gauss, reports Bloomberg. The airline said on April 18 said its net loss had narrowed to 19 million lats (27.1 million euros) last year from 85 million lats in 2011 as it cut routes and revenue remained little changed. That compared with a company forecast for a 38 million lats loss.
“The main reason is cost savings, our fleet is much smaller and we achieved the same revenue by flying less,” Gauss said in an interview in his Riga office. First quarter results are “much better than planned” and may be released in May, he said. The company targets a loss of 16 million lats for this year.
AirBaltic, which is the subject of a European Commission probe over state aid since November, is planning on upgrading its fleet, replacing Boeing 737s with Bombardier CSeries starting at the end of 2015 to reduce fuel expenses.
The Latvian airline has planned for 10 CSeries aircraft, and expects to use a majority of its options for more, the CEO said.
“If we could change the Boeing fleet with the CSeries today with the current fuel prices, the difference in operational cost would be $30 million just by changing aircraft,” he said.
The Latvian government hasn’t found an investor for the airline since it invited expressions of interest in August. “I think what’s holding up the investor is that you in general don’t want to invest heavily in European airlines” now, said Gauss.
Transport Minister Anrijs Matiss said in an interview with Nozare.lv that that there are two factors that hamper attracting investment to the airline. First of all, 2011 was not the most successful year for airBaltic, because of its its losses. It has to be proved to investors that the airline’s business plan is working and it will continue to operate. The second factor is the ongoing legal proceedings involving airBaltic, and the related risks.
It is important that part of airBaltic’s private liabilities to Latvijas Krajbanka have been restructured and it is also necessary to restructure the remaining liabilities. It is also important to continue work with the European Commission regarding state aid to airBaltic. If the sustainability of the airline’s business plan is proved, if the airline’s liabilities are restructured and the existing legal risks eliminated, it will be much easier to offer the airline to investors, explains the minister.
The government’s priority is a strategic investor, an airline that would not only financially participate in airBaltic’s development, but also help create new connections, passengers and destinations, adds Matiss.
The state owns 99.8 percent of the company’s stock.