A drastic fall in air travel demand has forced airlines around the globe to reconsider their strategic plans to adapt to a yet unknown new era in aviation. In this matter, airBaltic appears to be taking the lead by approving a new 5 year business plan called “Destination 2025 CLEAN” which does not only reinforce the commitment of the company to keeping connected the whole Baltic region, but it also paces the way to establishing an all Airbus A220-200 type fleet as well as increasing it up to 50 units from the current 22 by the end of 2023.
Due to the Coronavirus crisis, the new plan which has adjusted its forecasts from the initial one presented in May 2018 still focuses on expanding connectivity of the three Baltic capitals – Riga, Tallinn and Vilnius – giving wings to the regional economies and serving the old continent as strategic points between the East and West. The transition to a single aircraft model will however be carried forward as a response to reduced air traffic demand, while aiming to reduce operational costs – something already contemplated back in 2018. This means that the 12 Bombardier Q400s and 4 Boeing 737-300 will remain grounded and only the current 22 Airbus A220-300s will resume operations once the travel restrictions are lifted. In Latvia, this won’t be the case at least until May 12th.
The CEO of airBaltic, Martin Gauss, has said that “the new environment in the aviation industry requires serious and clear decisions for positive business development,” consciously betting on a strategy that will significantly increase passengers and therefore revenues in the following 5 years, despite predicted weak financial exercises for 2020 and 2021. Return to growth is then expected – the carrier has said in a statement -, to which higher capacity levels will follow by introducing more A220s.
The Latvian carrier, which is now predominantly owned by the state (80.2%), embarked on a forceful restructuring period since the state had to intervene in 2011. Back then, Martin Gauss was assigned as Chief Executive Officer to undertake dramatic changes in an operation that he would describe as “shrinking the airline by half.”
From then on, he has been able to run a prosperous and unique business model by mixing ultra-low-cost and full-service business class. Likewise, he opted for homogenizing the fleet, setting a solid airline with a small aircraft-based business, a decision that has played out well both cost-effectively and environmentally.
The company accounted for more than 2.5% of Latvia’s GDP in 2018, connected the Latvian capital with more than 70 cities, and along with the extensive codeshare agreements with multiple airlines throughout the continent, reaches over 300 destinations worldwide.
Concerning rumors on a possible IPO, Gauss admitted to flightglobal.com mid-February this year that it was a matter that was constantly being discussed, to which he still advocated for a continuation of state participation. In fact, in his favor and given the exceptional circumstances, it seems it will remain this way in the foreseeable future.
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