Airbaltic shifts into aggressive expansionist gear

Photo: Reuters / Scanpix

In eyes of Estonian national airline the plan pitched by competing Airbaltic – to grab direct flights from Tallinn as well as Estonian Air’s investors – will harm and undermine both.

Wednesday night in Riga, Latvia, Airbaltic presented journalists with its broader expansion plan till 2021 prescribing a whopping 11 direct flights into European cities both from Tallinn, Estonia and Vilnius, Lithuania. According to CEO Martin Gauss, this is due to their vision not to evolve as a Latvian but a Baltic airline.

As underlined by Latvian transport minister Anrijs Matīss, Baltics could contain but one airline and as of the existing ones Airbaltic is the most successful, the other nations ought to step in as its shareholders or opt to cooperate.

«Obviously, without the other Baltics it will be impossible for Airbaltic to continue expanding, it hits a wall,» said Mr Matīss, adding that they are seeking investors for Airbaltic in Estonia, in Lithuania, and in third countries as well. At that, Estonian state and Lithuanian state are equally welcome to purchase shares.

Official proposal lacking

Tallink majority holder Infortar remained unwilling to comment proposal by Latvians to invest into Airbaltic. «Such talks are confidential and therefore we are totally unable to comment,» said Infortar board member Ain Hanschmidt when asked about the offer made by Airbaltic.

Infortar has not backed from its proposal, published last year, to buy out all state holdings in Estonian Air.

«Our goal remains the same: to change Estonian Air into a totally private enterprise immediately after European Commission investigations results are announced – one with not a percent of state ownership left,» said Mr Hanschmidt. «At that, we are unwilling to assume the loss accumulated earlier.»

According to chairman of Estonian Air council and vice chancellor for transport at Estonian economy ministry Ahti Kuningas, the Latvian call for Estonia to join Airbaltic sounded via media only and official proposals have not been submitted. «Estonian state cannot make additional capital placements into Airbaltic as that would infringe EU state aid principles,» he observed.

Estonian Air council member Erki Urva ventured to label the Latvian message a misleading fabrication.

«Airbaltic is bluffing, as they have done before,» he said. «It was only recently that they endeavoured to open lots of direct flights from Vilnius, ending up hauling passengers to Riga Airport. With large international companies like Ryanair failing to open direct flights from Tallinn, our market has become no different for Latvians either.»

As for Estonian state, assuming a holding in Airbaltic is only possible if the major shareholder Latvian state up and grants Estonia a holding, said Mr Urva. «Placement of state money as investment is out of the question,» he added.

As observed by Estonian Air CEO Jan Olof Palmér, launching flights to compete with them would be bad for Estonian Air and  Airbaltic alike due to smallness of the market.

«I fail to understand the aggressive behaviour by Airbaltic, triggering such competition in a situation where Airbaltic belongs to Latvian state and Estonian Air belongs to Estonian state,» he said. «Recently, Airbaltic took on three of Estonian Air’s summertime flight directions, but I have to admit we have been much more successful than they.»

As for Latvian economy minister Mr Matīss’ proposal that Estonian state might participate in Airbaltic, Mr Palmér does not think this makes sense.

«Let no-one write Estonian Air off before EU competition authority makes its decision,» he says. «Personally, I think it a much better solution for the state to sell Estonian Air to the private company Infortar, than to participate in an airline belonging to another state which is struggling with the very problems of state ownership.»

Thus sayeth consultant

Commenting on the issue in Facebook, aviation consultant Toomas Peterson opined that for Estonia’s good it would be vital to create a new airline. He suggested a new competition for the reprivatisation of Estonian Air.

«Following the Brussels decision regarding state aid, which may mean Estonian Air’s demise or rebirth, a goal needs to be set to create a new airline, whether on the ruins of Estonian Air or a total tabula rasa, which minimally would fly five-six planes daily into ten European hubs,» wrote Mr Peterson.

«And, naturally, a competition needs to be declared for reprivatisation of Estonian Air, not so that successful mariners will festively declare that they will take over the balance sheet for free, without the liabilities.»