AirBaltic Confident In Its Business amid A220 Fleet Growth

 - December 2, 2019, 4:01 PM

AirBaltic chief executive Martin Gauss rejects the idea that the Riga, Latvia-based airline might fall into what IATA chief economist senior Brian Pearce described as “a long trail of weaker airlines” in Europe that could follow the fate of Wow Air, Flybmi, Thomas Cook Airlines UK, Aigle Azur, XL Airways, and Adria Airways, all of which filed for bankruptcy this year. Speaking at the recent IATA Wings of Change Europe conference in Berlin, Pearce predicted more operators on the continent will fail and airlines will need stronger balance sheets as consumer confidence and the business outlook dims. Although Gauss doesn’t see an immediate reversal in the industry’s fortunes, he disagrees with the predictions of a broad meltdown. “We are closer to a downturn than an upturn and I do see [fewer] airlines in Europe. But I do not agree with my colleagues [CEOs of Europe’s largest airlines] that there will be only four of five airlines here,” he told AIN. “If we would have an economic downturn, we will be able to adjust faster than others because of the 150-seater aircraft we have focused our business plan on.”

An all-Airbus A220 fleet by the end of 2022 serves as the backbone of AirBaltic’s Destination 2025 business plan. Gauss called the move to introduce the aircraft in November 2016 following a tough restructuring process “a forward-thinking decision that has most certainly paid off.” Gauss said. The Airbus twinjet over the last three years has demonstrated what Gauss characterized as “outstanding performance” and passengers like the aircraft, he said. AirBaltic just took delivery of its 21st A220-300— the 100th manufactured aircraft of the model—featuring an updated livery with greener tails to emphasize the airline's commitment to sustainability. Its 22nd example will join the fleet this month. By the end of 2020, AirBaltic plans to have taken 26 A220-300s and add a further 14 examples in 2021. In addition to the A220-300s, Air Baltic now deploys five Boeing 737s and 12 De Havilland Dash 8-400s on a route network spanning 70 destinations Europe, Scandinavia, the CIS, and the Middle East.

Riga remains Air Baltic’s main base, where it currently holds a 62 percent market share in terms of passengers and successfully competes with Ryanair, Wizz Air, and Norwegian, according to Gauss. Across the three Baltic countries, the airline’s market share amounts to about 40 percent, he said, conceding he is “happy” with that level. Next year, AirBaltic will base four A220s in Tallinn, Estonia, and two in Vilnius, Lithuania, up from three and one, respectively, at present. “If the aircraft could come quicker, I would base more of them there,” Gauss noted.

AirBaltic carried 4.3 million passengers in the first 10 months of the year, up 22 percent over the same period a year earlier. The airline still sees plenty of room to add to that growth and develop its route network, insisted Gauss, though he refrained from defining the targeted rate.

To serve growing A220 pilot training needs, AirBaltic on Tuesday will officially inaugurate its first Airbus A220 full-flight simulator, an investment Gauss called a “straightforward business case.” The location of the CAE 7000XR Series FFS right next to the airline’s headquarters provides “training simplicity and cost reductions,” he explained. The device, meant to train AirBaltic crew exclusively, will not satisfy all of the airline’s pilot training needs, however. “We still will need external capacity to train all crews. As we continue growing, we will invest in a second A220 simulator over time,” said Gauss.

The company continues to consider an IPO, he added, stressing that “nothing has been decided but I hear the voices of the shareholders that they would like to go that path.” Its primary shareholder, the Latvian state, holds about 80 percent of the airline. In July, the Latvian national carrier raised €200 million through a bond issue, a move Gauss said marks a historic milestone for the airline and proved that investors see “AirBaltic's strategy as mature and strong.”