Riga International Airport

Restructuring rigour from Riga: airBaltic narrows 2012 net loss

Latvia’s national carrier airBaltic recently reported a narrowing of its net loss in 2012, with RASK up 15%. The carrier is just over a year into a five year profit improvement plan. It says that it is surpassing its original turnaround plans and is on track to achieve targeted profitability by 2014. Network restructuring, improved revenue management and the relative economic health of the Baltic region compared with other parts of Europe are providing tail winds.

With only modest capacity growth planned for 2013 and monthly profitability exceeding management’s plan for the first three months of the year, there may be potential for airBaltic to improve on its 2013 target of stable RASK and perhaps to reach a positive net result ahead of schedule.

Nevertheless, its unit costs are not as low as the LCCs with whom it increasingly competes and labour productivity lags peers. Its fleet modernisation programme should help to narrow the unit cost gap, but management will be hoping it can retain its current pricing power.

airBaltic’s restructuring plan is in full swing, but competition from Estonian Air is rising

airBaltic’s restructuring plan fittingly dubbed 'ReShape' is in full swing now, but the loss-making Latvian national carrier is facing increasing competition from its northern counterpart Estonian Air, which is copying airBaltic’s model. The tactic is not surprising as Estonian Air’s president and CEO Tero Taskila was airBaltic’s former CCO and helped implement the carrier’s shift from point-to-point operator to a network airline based around feeding transfer traffic between Western Europe and markets in Eastern Europe, the Nordic region, Russia, the Commonwealth of Independent States (CIS) and the Middle East.

Ironically, airBaltic is currently moving away from a stringent focus on transfer traffic over its “North Hub Riga” at Riga International Airport to a more point-to-point approach as part of its drive to return to profitability and build a sustainable long-term business. Too much transfer traffic and a testing public dispute between the airline’s two main shareholders, which resulted in a decline in customer loyalty, brought airBaltic uncomfortably close to bankruptcy last year.

Improvement in Riga Airport’s financials but uncertainty about Ryanair’s presence

Latvia’s Riga International Airport (RIX) reported a profit of EUR705,000 in 1Q2011, compared with a loss of EUR21,150 in the previous corresponding period, in a report submitted to the governing body of the Ministry of Transport. The airport, a home to aggressive airBaltic, handled 939,630 passengers and 15,373 flight movements. But Ryanair, which has a significant presence could still move away.

Finnair-Flybe pact: A sign of regional airline deals to come?

Finnair has confirmed plans to increase its domestic and international feeder traffic network in cooperation with the UK’s LCC-cum-regional airline Flybe. Cooperation will be on various Finnish domestic routes including those to Tampere and Turku; also to Tallinn in Estonia. The cooperation will commence on 31-Oct-2010 using three “propeller-driven” aircraft (presumably Dash 8 Q400s) based at Helsinki Airport.