airBaltic’s Plan to Remain Relevant Despite Economic Woes

Michael Loftin

airBaltic 737-300 | Quentin Douchet

AirBaltic is the regional low-cost carrier based in Latvia, with its main hub being Riga International Airport. Founded in 1995 as a joint-venture between the Latvian Government and Scandinavian Airlines, airBaltic now has a fleet of 26 aircraft serving 65 destinations throughout Europe and the Middle East. Although many of these destinations are serviced through a broad codeshare network agreements with a variety of European airlines.

 

airBaltic Q400 | Riga International Airport

Financial Turmoil

Although most low-cost airlines have flourished in recent years, airBaltic has faced economic troubles quarter after quarter. In 2016, the airline reported a net profit of 1.2 million Euros (1.27 million USD), which is just a fraction of what other European low-cost carriers bring in on a yearly basis. For example, Ryanair netted an astonishing 1.25 billion Euros (1.33 billion USD) in 2016. The low profit can largely be attributed to the little yield per seat, which has dropped to a measly 88 Euros (93 USD). To help combat this profit drop, airBaltic has announced a plan to further expand its already impressive codeshare networks by reaching agreements with new airlines and strengthening relationships with airlines already partnered with airBaltic.

Fleet Rejuvenation

Despite incredibly low profits, airBaltic still plans to rejuvenate its fleet by replacing its aging  737-300/500 aircraft with new Bombardier CS300s. These aircraft are more fuel efficient, easier to maintain and offer greater passenger comfort. They also yield a greater profit margin per seat compared to 737s. The airline plans to take delivery of 20 more CS300s along with hiring up to 200 additional personnel to fly, service, and maintain the new aircraft.

 

airBaltic CS300 | Bombardier.com

Although airBaltic has a long, uphill battle to stay relevant in the European low-cost market, CEO Martin Gauss remains adamant that his airline’s fleet renewal program will strengthen the carrier, reduce operating costs, increase yield per seat, and bring profits back up to a sustainable margin.