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The move comes after Russia eliminated tariff discounts last month for all transit cargo traveling through Latvia by train. LDz cargo turnover dropped 9 percent compared to the same period last year and revenues plunged.
Prior to cutting routes, the company trimmed the number of carriages on some electric trains. The measures will significantly inconvenience railway passengers.
Janis Veidemanis, director of the railway department at the Transport Ministry, said LDz had to cut every 10th train because passenger transportation totally depends on cargo transit.
According to Biruta Sakse, advisor to the LDz passenger transportation head, passenger transportation costs 35 million lats ($56 million) a year, but LDz revenue from this activity totals only 17 million lats. The rest is covered from revenues in cargo transit.
"We need to save 2 million lats on passenger transportation because the transit revenues dropped," Sakse said.
Veidemanis said passengers should not be upset because the company canceled only those trains that were running half full.
"It's not a catastrophe," said Sakse. "We've preserved schedule intensity. In the morning and in the evening trains run with a 10- or 15- minute interval. We only canceled some electric trains in the daytime."
Veidemanis said after the new railway law comes in force Nov. 1, municipalities will order trains from LDz themselves because they know how many trains they will need.
"We should change people's way of thinking. There should only be trains that are used," Veidemanis said.
According to Transport Minister Vilis Kristopans, the new law can only be implemented if the government grants 10 million lats to municipalities, but this sum is not foreseen in next year's budget project.
Kristopans said the next government would have to solve this question when it passes the 1999 budget.
"If the government won't issue a subsidy, then it does not need this sort of transportation," Veidemanis said. "So Latvijas Dzelzcels would only run as many electric trains as it could afford, and that would be considerably fewer than now."
Sakse said LDz had to raise ticket prices to 0.18 lats for the first 8 kilometers and introduce strict ticket control to raise revenues from passenger transportation.
Meanwhile, Kristopans announced he would meet with Russian Transport Minister Sergej Frank in mid-September to discuss tariff discounts for LDz.
Veidemanis said Russia did not suspend previous tariff reductions as part of economic sanctions.
However, Kristopans said that doesn't mean Latvia and Russia are getting along.
"Russia did it because our relationships are very bad," he said.
Until there is a definite decision about the state subsidy or tariffs, Sakse could not predict when LDz would end the crisis measures.