Free trade, reorientation toward the West and tourism have all contributed to the fast development of air traffic in the Baltics. The three Baltic States– Lithuania, Latvia and Estonia–rank among the smallest European nations, but each boasts unique historic sites and landscapes appreciated by tourists, a long tradition in trade and crafts and a skilled workforce. As a result, a high rate of foreign investment to the “Baltic Tiger States,” as some call them, has brightened the outlook considerably for a region whose economies suffocated under Soviet rule until 1991.
Served exclusively by Aeroflot until they achieved their independence, the Baltics began the 1990s with no air transport industry of their own. They have since turned to the West for economic development and all three joined the European Union in 2004. Today, fuel-efficient Western airplanes fly in place of Soviet-era machines and sophisticated business processes have replaced the rigid, opaque practices of old.
The region’s oldest ERA member, airBaltic, hails from Riga Airport in Latvia. Jointly owned by the Latvian state (52.6 percent) and SAS Scandinavian Airlines (47.2 percent), the company started service in 1995 and has seen passenger traffic explode from 249,000 in 2001 to 1,036,300 in 2005. The increase between 2004 and 2005 amounted to a staggering 76 percent, the best performance of any ERA member airline and far above the ERA average of 6.3 percent. During the first half of this year, airBaltic carried 635,000 passengers, 44 percent more than during the first half of last year.
AirBaltic considers itself a regional airline, but its sphere of influence has grown beyond the Baltics following its rapid expansion. In fact, as its country’s largest airline, it has become the de facto flag carrier of Latvia. In addition to its base at Riga, where it controls 41 percent of all traffic, airBaltic also offers direct flights from Vilnius in neighboring Lithuania. The airline serves some 30 destinations–eight in the former Soviet Union and the rest in Western Europe. It employs 710 people and operates a fleet of nine 50-seat Fokker 50 turboprops, seven Boeing 737-500s with 120 seats each, and a leased McDonnell Douglas MD-80. It plans to acquire another four 737s.
Baltic Maintenance and the Lithuanian airline FlyLAL along with airBaltic’s own shop maintain the aircraft up to C Checks. AirBaltic attracts passengers departing from European airports with bargain-price tickets, and also uses promotional techniques in its home market. For example, it sells more than half of its tickets through the Internet.
The company posted a loss of €1.88 million ($2.39 million) due to fleet restructuring costs last year. Without such extraordinary costs due to the retirement of old aircraft, it would have made a net profit of €2.07 million ($2.64 million), according to Bertolt Flick, CEO of airBaltic since 2002. For the first half of this year, the airline says it has made a profit of €1.4 million ($1.78 million).
The per-capita gross national product of Latvia grew from $2,270 in 1995 to $6,559 in 2005. While the GNPs of Latvia and the other two Baltic states– $6,853 for Lithuania and $9,112 for Estonia–remain far below the more than $42,000 of nearby Sweden, the countries’ growth is unequaled in Western Europe. The situation has bred the likes of thriving upstarts Amber Air and Danu Oro in Lithuania and Aero Airlines in Estonia.
Lithuania, the largest of the three Baltic states with a population of 3.5 million, has three airlines offering scheduled services, mainly from the capital city, Vilnius. Swedish low-cost airline FlyMe and local investors own flag carrier Lithuanian Airlines, operating as FlyLAL. It operates a fleet of five Boeing 737s and five Saab 2000s for regional services. Newcomer Danu Oro works jointly with DAT Danish Air Transport and flies a Saab 340A and three ATR 42-300s taken from Air Lithuania, which ceased operations last November. Amber Air remains a modest operation for the time being with just two Saab 340Bs. It offers scheduled services between the airfields of Klaipeda and Palanga in Lithuania, and Hamburg, Germany.
In Estonia, national airline Estonian Air operates five Boeing 737s, while Aero Airlines offers scheduled regional services with eight ATR 72s. Aero links the three major Baltic airports of Tallinn, Vilnius and Riga with each other and with destinations in Scandinavia. The company’s ownership structure includes a 49-percent stake held by Finnair, which enjoys a steady diet of Aero’s feeder traffic at its Helsinki hub, just across the Gulf of Finland.
Meanwhile, all the airline growth has tested the capacity of the region’s airports. For example, Tallinn’s 1.4 million passengers last year yielded a year-over-year growth rate of 40.5 percent. Vilnius saw 1.28 million passengers in 2005, while Riga processed 1.9 million. The latter now links 27 countries, but still hosts no intercontinental flights. Riga Airport launched an infrastructure upgrade program that will raise its capacity to 10 million passengers a year.
While the Baltic states offer exceptional opportunities, they by no means guarantee success. Quite a few regionals have fallen out of the market, but the remaining operators seem to have done their homework. All have achieved significant progress in marketing techniques and apply modern management methods, often acquired from their Western co-owners. Internet ticket sales have become commonplace, and all have disposed of their antiquated Soviet aircraft. Propeller aircraft, including the Saab 340 and 2000, ATR 42 and 72 and Fokker 50, dominate the Baltic regional scene and, with today’s high fuel costs, airline managers seem in no hurry to introduce regional jets.
