Ryanair Enters Baltic Battle

Ryanair announced its first services to Tallinn last week with seven new routes into the Estonian capital. The Hub analyses the battle taking place in the Baltic capitals of Vilnius, Tallinn and Riga.

Ryanair will initially operate seven routes into Tallinn, for the moment the low-cost operator will not station a B737-800 but this should be a logical step given the size of the market. Sensing opportunities in the Baltic region as a whole, Ryanair already has a presence in the largest market in the Baltic region, the Latvian capital of Riga.

RYANAIR IN RIGA

It is the second largest carrier in Riga, operating 66 weekly flights to fourteen destinations with a market share of 10%, well behind the Latvian national carrier, Air Baltic, which has a 77% share of the weekly flights operated.

The top five carriers in Riga are currently

Source:Flightbase 14-20 September 2010

Ryanair's successful growth in Riga, despite there being a strong based carrier, will have encouraged Ryanair's entry into Tallinn, where Estonian Air is arguably a weaker carrier with a smaller network.

THE TALLINN MARKET

The Estonian capital is currently dominated by Estonian Air which has a 38% market share and Air Baltic, whose strategy is to become a major player across the Baltic states, which has a 27% share. With little low-cost operations in Tallinn, the Ryanair announcing of seven new routes will drive the low-cost presence in Tallinn.

With the only low-cost presence currently a thrice-weekly service from Oslo by Norwegian and easyJet's five-times weekly service from London Stansted,Ryanair will sense an opportunity to develop a market, with plenty of potential for growth.

Limited local air capacity in the Baltic regions, and certainly in Tallinn has made growing volume at airports a difficult task. Ryanair will be able to provide the volumes that Tallinn needs. As the Baltic states have been hit by the economic crisis, there may be some downgrading of passengers from full service to the low-cost market. With central Europe looking increasingly congested, the fringes of Europe remain home to less competition for the low-cost carriers. With Ryanair set to try and move in on more primary airports in central airport to establish growth with some yield behind it and take share of some already trunk markets, Tallinn will prove an attractive option for Ryanair and other carriers.

Ryanair has taken its time to enter the Tallinn market, and with Estonian Air the dominant national carrier, government owned, it would appear that Tallinn has historically not been a low-cost friendly option. However with airports keen to grow, on a level that Estonian Air has not been able to deliver, and Ryanair looking for new markets to place its expand aircraft portfolio, the time seems right for Ryanair to begin operations.

Other low-cost carriers are sure to follow now that Tallinn has taken a less protectionist stance over its market. Tallinn will have to have reduced its airport charges which will attract other low-cost carriers.

WILL IT BE VILNIUS NEXT?

With Ryanair having entered its second Baltic capital city, the natural question is whether the low-cost giant will now move into Vilnius, the Lithuanian capital. Ryanair does currently have scheduled operations into Lithuania, with a base in Kaunas, where it dominates the market operating 60 weekly flights to 18 destinations, with only Air Baltic providing other scheduled services with 6 weekly flights.

Vilnius is a market that has struggled in recent times. With state-owned carrier FlyLal going bankrupt in January 2009, the carrier lost significant scheduled capacity and has struggled to backfill capacity. With Vilnius based carrier Star1 Airlines this week entering administration, the Vilnius market appears to be a difficult one to operate I, with a population of just 3.2 million and average per capita GDP of 16,000USD per annum.

Air Baltic is currently the largest based carrier in the Lithuanian capital which a 32% share of all scheduled flights, operating to five destinations with a mix of B737 and Fokker 50 equipment. With little low-cost presence in Vilnius, Norwegian operates a thrice-weekly from Oslo, Ryanair would seem to have an opportunity to enter the Vilnius market, however there is some doubt about how much the state owned Vilnius Airport wants Ryanair in their backyard, with the government continuing to back new start up carriers.

Proposals are underway to create another based carrier in Lithuania with Air Baltic shareholder Baltijas Aviacijas Sistemas which plans to begin services in 2011 operating to a number of markets.

Whether this venture is able to be successful remains to be seen, and it may well be the case that in able to drive significant growth in the Vilnius market, a deal will have to be struck with Ryanair.