Latvia's aviation companies show increasing promise

While Ryanair are pondering in which Baltic state to open a new operational base, LSM's Dace Skreija looks at the benefits the aviation business brings to Latvia.

It is estimated that aviation brought €644 million into the Latvian economy, or 2.6% of the GDP with the direct influence at €141 million. 

airBaltic is, of course, the leading aviation company in the Baltics, and the Riga International Airport is being expanded, with no less ambitious plans for the future. The other Baltic states are, however, also putting more and more money into their airports.

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While airline bases bring business to airports, it's also important to know where any given company is based. Three airlines are based in Latvia besides Air Baltic Corporation. Namely, SmartLynx Airlines, PrimeraAir Nordic un RAF-Avia.

In a nutshell: 

  • SmartLynx Airlines want to bring full-service aircraft rental to places outside Europe
  • Iceland's PrimeraAir Nordic moves head office to Riga
  • RAF-Avia manage to weather  pēc tiesiskās aizsardzības procesa turpina darbu
  • Long-range flights as the next business opportunity

A growing business

SmartLynx Airlines was established in 1992. Formerly known as Latcharter Airlines, it has changed hands from the time it was founded. It has a subsidiary in Estonia, but most of its portfolio is made up by Aicraft-Crew-Maintenance-Insurance (ACMI), or full-service aircraft charter (meaning the aircraft is leased with the crew, technical maintenance and insurance), a service the company sells to airlines like easyJet, Thomas Cook, Monarch, Norwegian, and others.

The company takes seventh place in terms of market share at the Riga International Airport. airBaltic has more than 50% of the market share in its home base, and Ryanair takes second place.

SmartLynx carried almost 150,000 passengers in 2017. Their turnover has also grown immensely, with the unaudited consolidated turnover reaching €131.4 million, 21% more than in 2016. 

While data for 2017 is not available yet, in 2016 the company paid €1.9 million in tax, according to crediweb.lv data.

The company attributes its good results to effective management, renewing its fleet with cheaper planes, good marketing and entry into new markets. Furthermore, demand for air transport is growing, testifying to the fact that the market has become healthier following the recession. 

SmartLynx Airlines aims to become the first choice in the middle-price ACMI and charter flight market in Europe.

It also plans to enter new markets where there is less seasonal change than in Europe, where the market is most active from May to October.

It would entail expanding to Asia where there's the greatest potential for economic growth and number of passengers served. 

SmartLynx are considering to serve flights to Cambodia, India, the Filippines, and Malaysia, and also plans offering flights from Canada to Latin America and the Caribbean. 

Company moves head office to Latvia

PrimeraAir Nordic was registered in Latvia only recently, in 2014. Its mother company is in Iceland, where its head office was located until 2014 when it was moved to Riga. 99% of the company's activities are concentrated in Scandinavia, the US, Canada, England, France and Southern Europe, while the company offers flights to Malaga in the summer. 

Anastasija Višņakova, the commerce director of PrimeraAir Nordic, says last year was their most successful yet. They carried more than a million passengers, and their income grew 14%. In 2016 the company's turnover was €89.4 million, with €3 million in profit and €1 million paid in taxes. 

Višņakova agrees to SmartLynx's approach--in order to grow, they have to expand outside Latvia. There are also approaches the company could try in offering technological solutions and services to travelers, as there are successful finance, management, audio and printing solutions that have been successfully exported from Latvia. 

Per aspera...

RAF-Avia have been relatively unnoticed as the company mostly works in the cargo industry. Nevertheless it entered the passenger market in 2015. The company's name reflects its origins, the Riga Bus Factory (Rīgas Autobusu fabrika). But, much like airBaltic, the company has had to weather difficulties since it was started.

In 2012 the company had to apply for court protection as it was on the verge of bankruptcy, but it nevertheless managed to stay afloat and fulfill the obligations until 2015. While the company recorded losses in 2016, and had a smaller turnover than in the year before, it still paid around the same sum in taxes, namely about €850,000. 

Full speed ahead

Latvia is the leading aviation hub in the Baltics, and we must keep improving ourselves as competition is growing.

"In comparison to the other Baltics, Latvia has managed to develop its aviation industry, and therefore we have a so-called talent pool," thinks Višņakova.

Currently the number of passengers and industry jobs is growing, just like the volume of cargo served here, but we should look for ways to expand into other markets.

Artūrs Kokars, the head of the Latvian Association of Aviation, thinks that long-haul flights are the way to go, as it could bring Latvia a much anticipated boost and help retain its leading role in the region. This could mean expansion into Asia, Central Asia, the US, Canada, etc. 

This could happen within the next five years, but it requires work and some luck. Aviation companies and airports should be developed too. Recently, researchers from the Oxford University said that we've systematically invested too little in development, except for the past few years. 

While big investment projects are coming up, we should be investing regularly, not on a per-campaign basis. 

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