airBaltic CEO confident about future growth fuelled by the A220-300

posted on 1st August 2018 by Justin Burns
airBaltic CEO confident about future growth fuelled by the A220-300

Latvian carrier airBaltic is rising from its three Baltic bases in Riga, Vilnius and Talinn with growth being propelled by the Airbus A220-300 and is targeting further expansion.

The airline posted strong financial results for the first half of 2018 with revenue up year-on-year (YOY) by 19 per cent to €180.8 million on the same period last year (2017: €152.1 million) and it looks odds on to grow operational results for the year.

Growth was driven by a 20 per cent YOY increase in passengers to 1.9 million (2017: 1.6 million), and a 13 per cent rise in the number of flights to 26,579 (2017: 23,461). The load factor remained the same at 73 per cent.

Speaking to ARGS at the Farnborough International Airshow, chief executive officer (CEO), Martin Gauss is excited about the future after a record last year and start to this year and said the strategy to gradually scale up operations is working to plan.

He cites one of the reasons it is growing so strongly as being the introduction of the Airbus A220-300 aircraft – which it now has 10 of and what its entire fleet will eventually be comprised of.

On 28 May this year, airBaltic announced a firm purchase agreement for the sale and purchase of 30 Airbus A220-300 aircraft with options for an additional 30 aircraft of the same type.

The order complements the existing order of 20 A220-300 aircraft and forms the backbone of the new business plan Destination 2025 that builds on the successful progress of the current airline’s business plan Horizon 2021, which has laid the groundwork for future expansion.

Gauss said: “We have on order 50 firm orders and another 30 options so we could theoretically go to 80 aircraft which is mainly replacing existing aircraft as we have 32 aircraft the moment in operation.

“We need to replace all of these and then there is additional aircraft for growth over the next seven years and there is also options in case the growth is more than what we see today.

“The aircraft from the economics perspective is better than any other aircraft out there and it will stay like this as there is nothing new coming – and  the two new equivalent aircraft (Boeing 737 MAX and A320neo) are heavier – which means you have to take more weight in the air with the engines – so it (the A220) is more economic.”

Gauss said the A220-300’s widebody feel with the two and three abreast configuration along with wider aisles, bigger washrooms, windows and overheads, and the increased daylight have been well received by customers.

“It does not have a normal narrowbody feeling, and all of these things in combination make it a very, very attractive aircraft to have and it is why we said we are going to choose this,” he said.

In his view there is the chance other airlines will follow suit and potentially move to an all-A220 fleet and order more of the aircraft which Airbus manufactures, markets and supports under ‘C Series Aircraft Limited Partnership’ (CSALP) agreement with Bombardier, announced last month.

The A220-100 and A220-300 were formerly Bombardier’s C Series (CS100 and CS300) but rebranded after Airbus took a controlling stake in the Canadian aircraft manufacturer.

US carrier JetBlue recently ordered 60 A220s to replace its existing fleet of Embraer E190s and while a new start-up carrier led by the founder of JetBlue, David Neeleman, has committed to 60 A220-300s.

“The interest was there with Bombardier but the execution wasn’t there,” Gauss said. “There will be more coming because all the work that was put in the past to sell this aircraft will one day lead to contracts and firm orders and I expect we are going to see lots of orders. Airbus and Bombardier are positive about it and there will be significant orders for the A220 in the next six months I think,” he added.

Gauss said there was lots of interest at Farnborough in the airBaltic A220-300 which was on site and from the positive feedback given by representatives from other airlines who were given tours of the aircraft interior, he can tell orders will be placed.

As for its network, airBaltic now serves over 70 destinations from Riga, Tallinn and Vilnius and for summer 2018, it has introduced eight new destinations from Riga to Malaga, Lisbon, Split, Bordeaux, Gdansk, Almaty, Sochi and Kaliningrad and a new direct route connecting Tallinn and London.

Gauss said it is looking to further develop across the whole of the Baltics at its Riga, Talinn and Vilnius bases. “We are expanding in the Baltics and are strengthening Riga more by opening up more routes, but we are also adding aircraft to Talinn and Vilnius as we serve the whole of the Baltics,” he said.

He added: “Looking at our size, we are the biggest in the Baltics by far but we are not the biggest in Estonia or Lithuania, so the next step is to be the biggest in Estonia. In Lithuania it will be more difficult as there is a strong market share for both Wizz Air and Ryanair so it will take many years there, but we are growing in both by double-digit last year and this year.”

The market that airBaltic can tap into is vast according to Gauss, who said there is a population of six million people in the Baltics and 12 million passengers in the Baltics.

“If you look at Finland they have 5.5 million people and more than 20 million passengers because of what Finnair has done,” he said. “There is huge potential still to carry more passengers to and from the Baltics, and huge potential for airBaltic.”

Gauss forecasts a strong future but has concerns, especially over the economic future of the airline industry. “The biggest issue is there is an economic downturn coming for our industry and rising oil prices are always an issue.

“We have to keep in mind such macroeconomic factors as oil price or US dollar exchange rate that might influence the overall situation,” he said.

At the moment he is very positive as there is good demand for passengers which shows no signs of slowing. “With the company’s new business plan Destination 2025 airBaltic will continue double-digit growth. By adding more direct flights from all three Baltic capitals, airBaltic will remain the clear number one airline in the Baltic region,” Gauss said.