28 March 2011 | Earlier this year we published our ‘Innovative Airlines’ report (pdf here), which provides an overview of innovative products and services that passengers are experiencing on airlines around the world. An airline that also scores high on our list, is airBaltic, the hybrid low-cost airline of the Baltic states Latvia, Lithuania and Estonia.
Riga North Hub
Since 2008, airBaltic has made a transformation from a point-to-point low-cost carrier to a hybrid network LCC. The airline has turned its Riga ‘North Hub’ into a transit point for travellers from Nordic and Northwestern Europe to the growing markets of the former Soviet Union and the Middle East, as well as for Scandinavian passengers travelling to Southern and Western Europe. AirBaltic offers passengers connecting at Riga (65 percent of its customers) through ticketing and check-in, as well as 25-minute connection times. The airline has been growing its network fast, adding over 50 new routes since 2008 (for example to small cities in Finland) and currently serves 80 destinations from Riga, carrying over 3.2 million passengers in 2010 (an increase of 16 percent from 2009).
Despite its hybrid features, airBaltic’s Chief Commercial Officer Tero Taskila says the airline’s cost per average seat kilometer are on par with the likes of Easyjet and Norwegian and 30 to 40 percent lower than Finnair and SAS. Interestingly, airBaltic sees Turkish Airlines, which has also established an extensive network in Europec coupled with a low cost base, as one of its main emerging competitors.
Business Class: local, organic catering, Nespresso coffee
Besides its focus on transit traffic, other ‘hybrid’ features of airBaltic include a separate Business Class cabin, airport lounge and a frequent flyer program.
Reflecting the growing local food trends (see “Airlines go local and seasonal with their food offerings”), airBaltic has teamed up with Mārtiņš Rītiņš, a renowned Latvian ‘slow food’ chef, to serve dishes in Business Class that are based on organic, seasonal products provided by local Latvian farmers. The current menu for example includes free-range chicken breast, red deer steak and seasonal vegetables such as beetroot and pumpkin. Says CCO Taskila, “[Our passengers] can enjoy an excellent meal, while at the same time supporting local farmers who grow organic products. We also plan to increase the presence of locally-grown organic products in the economy class of airBaltic.” See this interview with Mārtiņš Rītiņš for more on the challenges of offering local, organic food up in the air.
On board airBaltic also serves Latvia’s national drink, Riga Black Balsam (a Latvian version of Jägermeister), local beers Aldaris and Švyturys, as well as BalticWater, mineral water from Latvia’s Venden national park that is specially bottled for the airline.
Further upgrading its beverage service, airBaltic since December 2010 serves Nespresso coffee to passengers in Business Class and says it will evaluate introducing Nespresso coffee as paid service in Economy class at a later stage. A nice amenity in the airline’s Riga business lounge is a ‘WaterBar’, which contains bottled water brands from around the world.
Ancillary revenues: iPad rental, Delayed Arrival Warranty, OptionTown
AirBaltic’s ancillary income is currently about 12 percent of its total revenues and the airline is working to increase this to 15 percent. Besides the usual checked luggage fees and onboard catering in Economy, interesting ancillary products at airBaltic include in-flight iPad rental and the delivery of fresh roses onboard. Eight iPads are currently available in its Riga lounge, and airBaltic will be the second airline in Europe (Iceland Express introduced the device on transatlantic flights in November 2010), to rent out iPads in-flight. At the start of the summer schedule in April 2010, 15 devices will be available for passengers to rent on flights longer than 2.5 hours for an EUR9 fee.
Two other innovative ancillary products from the airline both include an element of gambling. For a EUR3 fee, passengers in Economy can participate in an OptionTown ‘lottery’ to qualify for a cheap last-minute upgrade to Business Class. AirBaltic’s ‘Delayed Arrival Warranty’, meanwhile, lets passengers bet against a late arrival of their flight. For a non-refundable fee of EUR17 per one-way journey, passengers receive a double refund of their ticket price if the airline arrives one hour behind schedule at their destination.
New fleet and Riga terminal
AirBaltic’s fleet comprises 14 Boeing 737-300/500s, 8 Q400s, 10 Fokker 50s and 2 757-200s. The airline has already replaced older 737s with Bombardier Q400 turboprops on certain routes and is considering placing orders for 24 aircraft (B737-NGs or A320s) to replace its Boeings. New aircraft deliveries could start by 2013/2014 and financing will be aided by a potential investor or via an IPO.
AirBaltic’s rapid growth is also resulting in capacity constraints at its Riga hub and the airline has secured rights to develop and operate its own dedicated terminal at the airport. In order to generate a large number of design concepts, but also to communicate its Riga hub strategy in an inventive way, the airline held an international ‘New Terminal Design’ competition, inviting architects and students to create their concepts for a terminal with capacity of around 7 to 8 million annual passengers.
The contest has generated 125 architectural concepts from 70 countries and after a selection by an international jury of experts, airBaltic has put up 10 architectural concepts for a public vote online as well as on billboards in downtown Riga. The deadline for casting a vote was December 2010 and the winning concept (prize EUR100,000) has yet to be announced. Completion of the new Riga terminal is targetted for 2013.
Besides airBaltic’s aggressive growth strategy, the company behind the airline, Baltic Aviation Systems, seems to be also turning into a Baltic version of the easyGroup (of easyJet, easyCar and easyHotel fame), capitalizing upon the airBaltic brand to enter related markets, such as a taxi service (BalticTAXI) and bike sharing (BalticBike) (For more see “Entrepreneurial airBaltic extends brand to taxi and bike sharing services”).
11 innovative airlines to keep an eye on in 2011 (free pdf report)
Entrepreneurial airBaltic extends brand to taxi and bike sharing services
Low-cost Virgin Blue transforms into a full-service airline