Written by Dillon Shah. Interview performed by Célian Génier.
AirBaltic is a growing airline within the European aviation industry, to say the least. The carrier has huge plans, which would see it expanding further within the Baltic states and around Europe. The Airbus A220-300 (formerly the Bombardier CS300) is set to become the basis for the airline’s future operations. The entire fleet by 2025 will consist only of Airbus A220s, meaning the Boeing 737 and Q400 fleet will be phased out.
The Boeing 737s are slated to exit the carrier’s fleet by the end of this year (2019) while the Bombardier Q400s will remain in service until the end of their leases in two to three years. To compliment the retirements, airBaltic will take delivery of up to 80 new Airbus A220s in total, 19 of which have already been delivered. The agreement with Airbus consists of 50 firm orders and 30 options which are likely to be exercised.
The airline’s plans are exciting, and the future of the aviation industry in both Europe and the Baltic states is set to change dramatically as airBaltic’s plans come into full effect. We interviewed CEO of airBaltic, Martin Gauss, to see what his thoughts were on the latest developments within the industry.
The Airbus A220 - The Future
As mentioned, the Airbus A220 is set to become a major player within the airBaltic fleet. Not only will it allow for further expansion, but it will also enable airBaltic to streamline the product it offers, allowing for consistency across the network.
The CEO explained: “It’s a very important aircraft for us. We have taken the strategic decision to only fly, in the future, the Airbus A220-300. We have developed a business plan which would, in full extent by 2025, let us operate 80 of these aircraft. Today we have 19. This year we will be having a strategic change by retiring all the remaining Boeing aircraft and replacing them also with Airbuses. So for us, it is a very important aircraft because we put, with this aircraft, the best in class 150 seater, as the basis for our operation.”
AirBaltic is one of two A220 operators in Europe as of yet, the other being Swiss International Air Lines. The latter has already taken delivery of 20 A220-300s. Once all aircraft on order are delivered, however, airBaltic will become the biggest operator of the type in Europe.
Airlines across the Baltic states have sprung up over the last century, but later failed – that is, except airBaltic, an airline which has performed exceptionally well, compared to its predecessors. One of its more significant past competitors was Lithuanian flag carrier, FlyLal which also went bankrupt. Read more about the demise of FlyLal by clicking here.
With an entire business plan set out, which would improve and expand the airline’s operations, airBaltic’s success story continues.
Gauss explained, “Destination 2025 foresees us operating up to 50 Airbus A220 in the three Baltic capitals, with Riga as the main hub. 30 aircraft which are optional today, we would be basing outside, in Western Europe. And that in 2025, would be then airBaltic. We would expect, if we only operate 50 aircraft in the Baltics, we expect around 1 billion revenue and around 10 million passengers. If we operate also aircraft outside the Baltics, we expect that should be around 15 million passengers and about 1.5 billion revenue.”
FlyLal’s bankruptcy was a huge loss to the Lithuanian aviation industry. Passenger numbers at Lithuanian cities such as Vilnius, reduced dramatically and Latvia was the only country left in the region with a stable flag carrier. The Baltic states had been, of course, a very difficult area to operate in, for airlines. When asked, Gauss said that things have actually started to improve.
“The Baltics are developing very well. Not only for us, in general, the passenger numbers at airports, they are going up in the last years, of course driven by airBaltic’s development. We are using Riga as a hub which means the population which we have in Latvia its 1.9 million people, we are transporting this year, 5 million passengers, so multiple of the population but due to the hub, Riga functioning as a hub, it's not a problem, because half of the passengers which we carry to Riga are still transferring and half of them are point-to-point. But we have started developing airports in Estonia, where we are market leader now, in Tallinn, and in Vilnius we are developing further. So we will see in all three Baltic capitals, a significant increase in passenger numbers over the next years.”
The Airbus A321XLR
Unveiled on the first day of the Paris Air Show this year, the Airbus A321XLR is the longest range variant of the New Engine Option (NEO) Airbus A320 family. The aircraft builds on the range capabilities of its sister, the A321LR which entered service late last year with Israeli carrier, Arkia.
“There is, since this air show, a new aircraft launched, and announced for 2023, which is the A321XLR. That is a very attractive aircraft because it would be able, as a narrow-body, to serve the Baltic capitals with many destinations in North America. That is a very attractive aircraft because it will come at a very significant lower cost than flying a wide-body. AirBaltic’s business plan is to focus on the Airbus A220-300 for the time being. And let’s see the developments when we come to the end of our business plan, what is changing. May be another airline has decided to take that aircraft type and serve Riga or any of the other Baltic capitals.”
Gauss continued, “We are interested in the A321XLR, and its capability, it’s new. We are interested in anything which for the future would expand what we are doing today as a business plan. But first of all, this aircraft is not available before 2023, so therefore we are interested, but we are always interested in any development in our industry.”
The CEO said that the carrier would follow it's business plan and would consider purchasing new aircraft thereafter.
New Routes & Connecting Traffic
India can be a difficult market to serve. While demand from Latvia is more or less undiscovered, it’s more the distance that’s a problem. With the Airbus A220-300s that airBaltic currently operates, only the Western border for the Asian country is reachable. However, at the Paris Air Show, where the interview was held, Airbus had just announced a range extension for the aircraft.
“So far we were able with this aircraft to fly to the western border of India. Now the aircraft got a range extension of one hour, so we can go to Delhi now from Riga. Riga-Delhi is possible, we have not looked at it to this detail because it is a relatively new development. But we will be looking at it to see whether there is a market for us.”
AirBaltic operates in a market that has been very unstable over the past few decades, as mentioned above. However, the carrier has found a way to draw in traffic from around its network. By optimising its schedule to cater for connecting passengers, demand has risen and airBaltic has been able to increase its overall passenger numbers, and more importantly, fill its planes. While some may the Baltic’s geographical position is a disadvantage, Martin Gauss said that it was in fact the opposite.
“We have a very good position as we are sitting between CIS countries, between Scandinavia and Europe, and looking at our transfer traffic, especially the evening flights going to the East where we use night flights and the capacity of our aircraft at night to return from Eastern destinations like Tblisi, Baku, Almaty, Abu Dhabi, so actually our geographical position in the Baltics is helping us.”
He added, “For the Riga traffic, the mix is around 50%. There’s a variation in the year, but around 50% are connecting in Riga, and 50% is point-to-point.
The Struggles Of Europe
The European aviation industry is facing a number of major challenges. Overcapacity in Europe is one of the bigger problems that the industry is facing right now, according to the Lufthansa CEO in a report by CNN, and added that he expects more airlines to go bust over the coming years.
However the Baltics are a different story. AirBaltic has control over almost all of the market share in Latvia, with Estonia and Lithuania soon to be added to the list, if not already.
Additionally, fuel prices continue to rise and pose a major threat to airlines worldwide. Combined with the competition and overcapacity in Europe, it’s definitely a difficult market to operate in. However, airBaltic was quick to react. The CEO told us that the carrier took a number of steps to ensure its position in the market.
“The first thing we did, we bought the most modern and fuel-efficient aircraft in its class, the A220-300, so that is significantly reducing our fuel consumption, and on top of this of course we are doing all the elements available to us, like fuel-hatching, securing good fuel prices at good times, so we do what other airlines do, but the biggest impact is investing in the A220-300.”
Why The A220
The Airbus A220 is now the future of AirBaltic. While it is definitely a major improvement over its existing aircraft, we asked if Martin Gauss regrets the choice of the Airbus A220 now that other airliners in its class have been unveiled.
“The A220-300 when we decided in 2012, was compared to the 737 MAX and to the A319NEO, it was not compared to the Embraer E2 because at that time that aircraft wasn’t available. Compared to the A319NEO, the aircraft is significantly lighter, with the same amount of seats, also compared to the Boeing it is lighter with the same amount of seats, to the Embraer, the Embraer doesn’t have the range nor does it have the seats available to us, so from an economic point of view, the only aircraft at that time available to us, was the A220-300. Today it is proven that this is the only aircraft in its class which you can use for this kind of service.”
AirBaltic – Time To Join An Alliance?
Many of the larger airlines around the world have already joined alliances. However, airBaltic has not joined yet joined one, and in a market which, as mentioned, is struggling with overcapacity, could it be time to finally do so? In fact, CEO Martin Gauss says that joining one would jeopardize the carrier’s existing agreements with its partners.
“We are not planning to join any alliances. We have 21 code-share partners and our code-share relations are so good among all alliances that if we would join one alliance we would have to get rid of some of the functioning code-shares and that’s why we don’t want to join one.”
A Fantastic Future
As mentioned, airBaltic is one of the more successful airlines within the region. Eastern & parts of Central Europe have been very unstable, with airlines such as MALEV (Hungary), Slovak Airlines (Slovakia) and FlyLal (Lithuania) going bankrupt, among others.
However, as it continues to become a major threat to foreign airlines, could the future of Latvia, Estonia and Lithuania be airBaltic? For the moment, it seems so – little domestic competition, a profitable business model and a strong route network, there’s little reason why not.
Thanks to the airBaltic team and CEO Martin Gauss for giving us this opportunity. Also thanks to Dillon Shah for writing this article and to Célian Génier for performing this interview.