Baltic airlines eye price hikes

  • 2001-10-11
  • Kairi Kurm
TALLINN - Citing an increase in insurance costs connected to the Sept. 11 attacks, Baltic air carriers are considering raising ticket prices 3 percent to 6 percent.

Estonian Air raised prices between 3 percent and 5 percent on Oct. 3, an increase of 200 ($12) - 400 kroons, said spokesman Raimond Made.

Unlike Latvian and Lithuanian airlines, Estonian Air canceled flights and operated leased aircraft on its most popular routes from Sept. 26-28, while it was negotiating new insurance coverage.

Insurers worldwide increased costs for coverage of terrorism and acts of war, which is required for air carriers. Estonian Air said last week that costs for the insurance had risen seven-fold since the attacks.

Like airlines around the world, Estonian Air has seen a drop in ticket sales.

"We have less passengers than usual. It's the general unstable situation on the aviation market, which keeps people from flying," said Made.

Estonian Air, which had previously planned to make its first profit since its privatization in 1996, is now facing the likelihood of less optimistic results this year. According to Made, profits could be 5 million to 10 million kroons lower.

Estonian Air is partly owned by Denmark's Maersk Air (49 percent), the Estonian government (34 percent) and the investment bank Creso Investeerimisgrupp (17 percent).

Latvia's national airline airBaltic is considering fare increases of up to 5 percent beginning Nov. 1 to cover higher insurance costs.

But the company has managed to keep its planes flying.

"We managed to negotiate with the insurance brokers within a short period of time and could thus handle services without any interruption," said Vija Dzerve, the company's spokeswoman.

According to Dzerve, ticket demand increased 16 percent in September compared to the previous year and the figures for October were promising.

"With this unstable situation it is hard to predict whether we will keep this trend," said Dzerve. "Maybe the rise would have been bigger if the Sept. 11 tragedy would not have happened. We hope to end the year breaking even."

In 2000 the company reported its first profit , 77,000 lats ($125 000), on a turnover of 24.94 million lats.

The airline is majority owned by the Latvian government. Scandinavian Airlines Systems is the second largest shareholder. Lithuania's national carrier, Air Lithuania, is 100 percent state owned.

"We don't know whether we will increase the prices at all. Maybe we can find another solution," said Romas Gegznas, general director at Air Lithuania. "It depends on how our competitors will do. The increase may be between 4-6 percent, no more."

He said ticket sales have not yet declined.

"The demand has been increasing every month, even in September. We expect a 10 percent increase in passenger traffic for 2001 compared to last year," said Gegznas. "It's hard to predict economic results for 2001. The first half of the year we operated unprofitably, but for the third quarter we predict a small profit. The turnover will rise 5 percent over the previous year."