airBaltic Riga Base 2011

Two years ago I took a close look how airBaltic had transformed its Riga base from point-to-point strategy in 2007 to a genuine hub in 2009. Now it’s time to find out how things have evolved since then.

It’s clear that the hub strategy has not changed. Almost all aircraft operations can be divided in 5 groups: group 1 in morning, group 2 in afternoon, group 3 in evening, group 4 late at night, group 5 also at night but with earlier departure and later arrival than group 4.

Anyway there are some details that have changed:

1. Almost all Nordic routes have gathered in group 5. In 2009 Oulu was operated in group 2, Alesund in group 3 while now both of them and also some new destinations are in group 5.
2. Billund - previously group 3 destination - now have altering group 1 and 3 operations.
3. Group 2 – the important daytime operations to mayor European cities – has sprawled. Both backwash and uprush windows are longer due to the new service to Madrid and rearranged timings for some Baltic flights. Berlin and Stockholm daytime operations are no longer in group 2. Instead two flights are made.
4. Second daily flights to Paris and Amsterdam have joined London in group 3.
5. Some clustering has happened in departure times for flights within one geographic region. For example – group 5 flights to Kalinigrad, Palanga, Tartu and Kaunas all depart at 8.20pm.

Overall the hub operation strategy is little bit clearer and still is the lifeline of airBaltic. Unfortunately flights to Visby to be cut this month, yet not really a surprise as they did not fit in any flight group so transfer possibilities were too limited. As for future – the arrival and departure times for group 2 should be kept under control – no more too far destinations like Madrid. It would actually make sense to swap Dublin and Madrid flight times. Long arrival and departure frames make transfer longer if traveling between close cities where majority of the traffic lies. There should not be routes operated only in group 1 or in group 3 – they rather must be operated in some other group or using altering pattern like Billund does. It’s similar to the mixed-up schedule pattern for p2p carriers I proposed earlier. And there should not be new routes from weak destinations operated out of hub pattern. In contrast - there may be strong routes with high frequencies that go out of the hub frame - like many current departures to Helsinki, Vilnius and Tallinn.

Riga to Moscow Fare Watch

Moscow is one the busiest route from Riga airport, the traffic is strongly supported by the large Russian community in Latvia but also reflecting the booming tourism, business and transferring passenger numbers.

Up to summer 2010 Riga to Moscow market was served only by joint 3-daily Air Baltic and Aeroflot product to Moscow’s Sheremetyevo airport (SVO) but in August last year things got more diverse. UTair started their own daily flight from Vnukovo airport (VKO) using 50-seat CRJ200 and also offering connections to their vast domestic network. In November 2010 another Russian airline Transaero started twice weekly Boing 737-500 flights to Moscov’s Domodedovo (DME) airport followed by Air Baltic’s supplementary two weekly flights on that exact route. On the other hand – RIX-SVO airport pair is still the dominant as are the two flag-carriers – Air Baltic and Aeroflot.

Aeroflot, Transaero and UTair typically charge more for one-way tickets than for corresponding segment on return ticket. For this analysis one-way prices are determined as those available for return tickets though they can’t be booked without buying also Moscow-Riga flight.

As seen in the graph, all airlines have set their base levels around 90€ mark, but only Air Baltic and Aeroflot manage to sell tickets more expensive than 200€. In the examined 2-month period average ticket prices are as follows: Aeroflot - 157€, Air Baltic - 125€, Transaero - 117€, UTair - 109€. Note that Air Baltic is the only airline charging for luggage on this route. The prices for all airlines make peaks also for well-ahead dates suggesting that lots of travelers on the route are date-inflexible.

Last year I analyzed Riga-Oslo route in a similar manner. The Riga-Oslo and Riga-Moscow routes have several common features – they are comparable in passenger flow and offered capacity, booth served by four airlines and three airports (in Oslo or Moscow) and are almost the same in lenght. The overall average available fare for Riga-Oslo in two month period was 71€ (including credit card fee) while for Riga-Moscow it is 128€. The higher price for Riga-Moscow flights seems to be a result of governmental control yet factors like different costumer groups and seasonality may have played a role.

Riga to Oslo ticket prices

Riga to Oslo is one of two routes from the Baltic States served by four airlines (the second being Riga-Moscow). While Riga has only one airport, Oslo area is covered by three airports: the primary Gardermoen airport (used by Air Baltic and Norwegian), secondary Rygge/Moss airport (used by Ryanair) and Sandefjord-Torp airport located more than 100km from Oslo, but convenient for area South-West of Oslo and chosen by Wizzair.

The biggest carrier on the route is Air Baltic accounting for 51% of capacity share and – as using smaller aircraft than others – 68% of frequency share. Closest runner-up is Norwegian with 19% of capacity and 14% of frequency. Ryanair offers 18% of capacity and 11% of frequency while Wizzair 12% of capacity and only 7% of flights as offering only two departures per week.

Fare graphs indicates two price peaks – one on Oslo-Riga route on December 15 to 23 and the second on Riga – Oslo route on January 1 to 5. This strongly suggests that during Christmas time flights are used by Latvian workers visiting their families. Each of the airlines tries to differ from the others – Air Baltic and Norwegian provides connecting flights and uses the primary airport, Air Baltic offers big number of departures. Ryanair targets price-sensitive passengers and population South-East fro Oslo, Wizzair relies less on Oslo city but caches passengers South-West from Oslo. Here you can see how well the airlines manage to translate their strategies into cash from tickets:

Edited Nov21 - I found an official confirmation that Air Baltic's EUR 5 transaction fee can be avoided by using Baltic Miles MasterCard so ticket prices in the research are lowered by EUR 5 and five euro surcharge to usual Visa and MasterCard is added.

The average fares in the two-month span (November 18 to January 17) are as follows: Ryanair – EUR 29, Wizzair – EUR 37, Norwegian – EUR 74, Air Baltic EUR 81 EUR 77. Prices for Air Baltic and Norwegian are extremely similar and they even peak at the same days indicating that the two companies compete for the same passengers. Less successful are the two youngest operators - Ryanair and Wizzair. Booth started the service over seven month ago but tickets are still extremely cheep and are not coming significantly more expensive closer to the flight dates. On the other hand during Christmas period Wizzair has as high prices as Air Baltic and Norwegian showing that their strategy of targeting specific region near Oslo works. Overall it is clear that the ticket prices for Riga – Oslo route is low due to the high supply and some operators (Ryanair and Wizzair in particular) may even drop it.

A Rescue Plan for Estonian Air

Estonian Air fleet consist of two B737-500 and two 737-300. The two Saab 340 props are operated by subsidiary Estonian Air Regional. While industry’s average passenger drop in 2009 is forecasted at 3.1% Estonian air passenger figures in October shrunk by massive 31.9 %. The main reason for such a dramatic drop is cuts on frequencies with caused fewer passengers and even more cuts again. Even the new routes (to increase the aircraft utilization) are opened on low frequencies. As a result Amsterdam and Brussels are served only three times a week; Moscow, Kiev, London, Munich only twice weekly. No service to Paris and Berlin will be provided during week examined (January 11-17, 2010). Reasonably served B737 middle-range destinations are Copenhagen (19x weekly), Stockholm (10x weekly + more flights by Estonian Air Regional) and Oslo (5x weekly).

Although the fleet was cut this year - the aircraft utilization stands only at 57% - with means one plane is still odd.
The management always refers to low passenger demand and hopes for arrival of the new CRJ900NG whose smaller capacity and economics will allow operating more frequently.

Instead of cutting capacities I advise to expand the market. Riga airport on therouteshop.com has announced lack of five weekly flights from Riga to Paris. Estonian Air from Tallinn could pick up passengers at Riga organizing the route TLL-RIX-CDG(or even better ORY)-RIX-TLL. airBaltic is concentrating on mid-day flights to Western destinations and we see less and less evening and morning departures from Riga to Brussels and since KLM left – no evening and morning flights to Amsterdam. This mean Riga have a gap in market for time-sensitive passengers to Brussels and Amsterdam and Estonian air could cover it.
It would be a bad idea for Estonian air to enter Riga-London (daily by airBaltic, 2x daily by Ryanair and coming 3x weekly by Wizz Air) and Riga-Berlin (up to 3x daily airBaltic) so planes to London and Berlin may stop at Palanga. Palanga-London is highly attractive route with no direct competition. Palanga – Berlin is bit less attractive but - although slower than London - would gain passengers.

The aircraft utilization would be: 1st to Copenhagen in morning, Berlin in midday, Copenhagen in evening; 2nd to Stockholm in morning, Oslo or Moscow in midday, Stockholm in evening; 3rd to Brussels and Paris (time of day depending on Brussels); 4th to Amsterdam and London (time of day depending on Amsterdam).
Such routing would decrease demand on Copenhagen so no midday flight needed. Munich, Kiev and other low frequency destinations most probably must be dropped.

Riga to Frankfurt - Prices of LH, BT and FR

Riga to Frankfurt is the only route from Riga with three competing airlines. Although airBaltic sell some Lufthansa connections – RIX to FRA seems to be at battlefield. airBaltic started this route in September as an important business destination for the connecting traffic but will BT steel Riga to Frankfurt O&D traffic?

Booth LH and BT operate the route daily and with the same type of aircraft, but – as airBaltic 737-500 has more dense seating - BT’s weekly seat capacity is higher.
Ryanair use more distant Hahn airport with is specialized in “illegal” transfers and serving other surrounding communities rather than Frankfurt city. Since BT’s entrance FR is no longer the only alternative to LH high fares (see graph) so the demand may be down (no proof).

As Lufthansa sustain a complex fare system with one-way tickets about the same price of a round trip – the round trip fares in this research is divided by two. So even don’t try to book them – they are imaginary fares. Lufthansa ticket include 20kg of checked-in baggage, booth BT and FR don’t.
The price graph clearly indicates – Ryanair is the cheapest option, then comes airBaltic, then Lufthansa. Variation of LH’s prices is extreme - from €147 to €510. It seems obvious that Lufthansa want to bring traffic to their hub instead of wasting the seats for the short Riga to Frankfurt service by offering more reasonable fares.

airBaltic RIX Base: 2007 and 2009

While Q1 GDP in the Baltic’s is falling by 18% in Latvia and by 14% and 15% in Lithuania and Estonia respectively airBaltic in May sees a stunning 33% increase in passenger numbers at Riga base made by transfer passengers. What are the factors that make people transfer though RIX more and more?

Small Airport - Short Transfers
Riga airport is so tiny that getting from one gate to another takes no more than a few minutes and bit longer if passport control needed. For airBaltic that allows selling tickets with transfer time of 25 minutes - with makes total flight time comparable - in some city pairs - with direct service in  and allows more flights to be connected. Lost baggage numbers are not published so far. In future airport wants to keep transfer times in the same level but it may harder to manage if new terminals is added.

More Convenient Schedule Attracts Thousands
In comparison with year 2007 schedule is re-arranged to allow selling more connecting flights especially to and from Northern Europe.

In 2007 most flights could be divided within 4 groups (see visuals). Group 1 included Baltic and Scandinavian capital and limited number of cities in Western Europe. Group 2 included mostly eastern cities and few in Western Europe. Group 3 included all Nordic and Baltic destinations and key European destinations. Group 4 included just Baku, Tbilisi, Dublin and Saint Petersburg. Few low-frequency vacation destinations were operated out of these groups. This schedule allowed transfers between Western Europe, Scandinavia and the Baltic states to cities in the East (Kiev, Minsk, Tbilisi etc).

Things have changed much since 2007 although the same 4 flight groups are still live. Group 1 is almost the same as in 2007. Group 2 has experienced serious change. Now it consists mostly of West and South Europe destinations with high frequencies. Group 3 is the same just expanded. Group 4 gained low-capacity flights to Tallinn and Vilnius because of the very last arrival at destination and the very first departure. Group 5 is a newcomer. As it allows transfers with group 2 - booth in morning and evening - that's whay it has a big importance. Group 5 includes high capacity flights to Vilnius, Tallinn, Helsinki (B737-500 or -300 instead of F50) and other cities. If operated to close airports this group requires long night stops (as it is now) but I see big opportunities for group 5 to attract services to airports further in east. Now most of pax seems rotating trough groups 1-2-3 and 2-5. The original concept of transfers from the East to the West has become secondary. Flights to central Asia and Caucasus all are with night stop and can be connected at lest to flight group 2. Flights to Eastern Europe are split between all groups and have no common policy.

Punctuality Increase and Better On/Offboard Service
In summer 2008 airBaltic faced a decrease of 15-minute on-time performance down to 75% in August. In autumn situation gradually became better and reached record-high 94.2% on-time performance in May 2009. Furthermore some feeder operations in group 4 now backup group 5 in case of flights from group 2 being late.
In May airBaltic launched a business lounge at RIX (in reality – took over the only existing one) to attract more high-end passengers. And - even better - a portable entertainment system is for rent onboard flights longer than 3 hours.

Conections of Long-Haul Flights
Current flight group 5 allows operations for up to 15h whith -  together with 45min turnaround - allows to reach airports within 5700km - with is not enough to reach airports in the Fare East or in North America. For longer flights exist two options: 1st – to depart after group 2 arrives and arrive before groups 3 and 5 depart. This will work well if groups 3 and 5 are upgraded with second daily flights to West Europe destinations (MUC, CDG, AMS etc); 2nd option – departure after groups 1 and 5 arrive and return next day before group 2 depart. This requires upgrades of groups 1 and - again - 5. As group 3 is currently more developed than group 1 - first option is more reasonable. Booth options gives range of 8500km with is enough to reach all Asian cities (except Singapore) and US East coast cities.

If in an economic slump we see such increase in BT RIX traffic than what to expect at upturn? BTW - rumors are going that Warsaw and Pskov will be next destinations announced.