Ukraine Crisis and Engine Overhaul Delays Challenge AirBaltic

 - December 22, 2022, 4:00 AM
Latvia's AirBaltic continues to add Airbus A220 aircraft to its fleet despite delays in overhauling the twinjet's PW1500G engines. (Image: AirBaltic)

While AirBaltic says it has successfully adapted its business to counter the impact of Russia’s invasion of Ukraine on its network and revenues, ongoing problems with the Pratt & Whitney PW1500G geared turbofan engines that power its Airbus A220 fleet remain a headache for the Latvian state-owned airline. Extended turnaround times for servicing the engines are continuing to cause operational disruption.

“To be clear, the PW1500G powerplants are very good. We have flown them for six years now. They are overperforming in terms of fuel and thus CO2 emission savings, AirBaltic CEO Martin Gauss told AIN. “The big issue for us is Pratt & Whitney not being able to overhaul the engines in the amount of time they promised us. We got told that supply chain issues are causing a shortage in parts and they do not have sufficient spare engines to give to customers.”

Dismantling engines from the aircraft, shipping them to the maintenance, repair, and overhaul (MRO) facility, and refitting them on the wing used to take six weeks. Now, a major engine overhaul takes as long as eight months, according to Gauss. The timing fluctuates slightly depending the mandated times between overhauls but in early December seven A222-300s were standing idle on the tarmac in Riga, the airline’s main hub, without engines.

“That is 14 engines that we are missing,” Gauss explained. The shortage of spare engines prevented AirBaltic from flying its own fleet at full capacity this summer and forced the carrier to contract replacement capacity—of on average four aircraft—with five ACMI wet lease providers to meet post-Covid demand for flights.  “Our unhappiness [with the situation] is reflected in discussions we have with Airbus and Pratt & Whitney,” he commented.

The discontent resulted in AirBaltic and Pratt & Whitney entering in a supplemental commercial support agreement outlining how these operational issues are addressed. It also specifies the support the airline can receive in case its A220s are unavailable for operations due to defined engine operational issues and there are no replacement engines available. Asked whether the agreement covers all the past expenses and future costs related to the PW1500G engines, Gauss said only that the company “does not disclose compensation.”

The aircraft engine maker has acknowledged the difficulties caused by capacity issues in its product support network. “We’re experiencing global supply chain challenges like many in the industry which are limiting the availability of structural castings and other parts,” a Pratt & Whitney spokesperson told AIN. “We’re working on mitigation strategies with our supply base and expanding MRO network capacity. At the same time, we’re continuing technology upgrades to extend engine time on the wing. We expect pressures to begin to ease in 2023 which will support the output of both production and MRO engines.”

Despite the engine maintenance troubles, AirBaltic has continued to expand its A220 fleet. The carrier was the launch operator of the A220-300, in November 2016, when the twinjet was still part of Bombardier’s product portfolio under the CSeries name.

The Eastern European airline ranks as the second largest operator of the aircraft after Delta Air Lines, which has 58 A220s—45 of the smaller -100 and 13 -300s—in its fleet, according to Airbus data through the end of November.

AirBaltic took delivery of its 37th and 38th aircraft registered as YL-ABK and YL-ABL, late last month. A further two are due to arrive in the Latvian capital Riga before year-end or early January depending on Airbus’s stressed delivery schedule. An additional eight A220-300s are set to arrive in 2023 and the final two of its firm order for 50 of the type are scheduled for 2024. “Now we are looking at how we will deal with the 30 options and purchase rights we hold,” said Gauss.

AirBaltic posted a net profit (before exceptional items) in the third quarter and an operating profit for the first nine months of the year as it benefitted from a strong post-Covid-19 demand recovery and managed to offset the effects of Russia’s invasion of Ukraine. AirBaltic and Finnair are among the European airlines the most impacted by the war and the closure of Ukrainian and Russian air space for European operators. AirBaltic has additional bases at Tallinn (Estonia), Vilnius (Lithuanian), and Tampere (Finland).

“We lost all our direct and transfer traffic to Russia, all our traffic to Ukraine and we have to circumnavigate some of our Eastern European destinations,” noted Gauss. The airline’s business plan for 2022 had projected that direct traffic to Ukraine and Russia would account for 7 percent and 3 percent of revenues, respectively. 

“We showed amazing resilience and flexibility in adapting the business,” Gauss asserted. The network was tweaked with new destinations such as Marrakesh in Morocco and Gran Canaria, one of Spain’s Canary Islands, and it significantly expanded its ACMI activity to compensate for the smaller network.

In the third quarter of 2022, AirBaltic deployed 1.48 million seats (about 74 percent of 2019 levels) in its own network and about 0.66 million seats on wet-lease contracts with SAS Scandinavian Airlines and Eurowings/Eurowings Discover. The total number of seat capacity deployed exceeded 2.4 million which was an increase over the total seats deployed in the third quarter of 2019. This winter schedule, AirBaltic has six A220-300s based in Zurich to serve the Swiss network.

“For next summer we are planning to use 14 aircraft on wet lease contracts with different airlines, including Swiss,” Gauss said, describing ACMI operations as a “good business” for airBaltic. “The aircraft are new, it has a low operating cost, passengers like it and because we are a hybrid carrier our crews have experience with a service model that combines an ultra-low-cost concept in economy with a fully-fledged business class,” he explained.

The subcontracting of up to 15 aircraft with crew, maintenance and insurance was also part of the business plan AirBaltic submitted to the European Commission when it sought approval for the Latvian government's investment of €250 million in 2020 to compensate the losses caused by the Covid-19 pandemic. The plan calls for AirBaltic to repay the recapitalization via a stock exchange listing anticipated no earlier than November 2024.