The situation with scheduled carriers is quite clear, as airBaltic remains the last frontier within the three states of the Baltics (Lithuania, Latvia, Estonia) to fend off foreign low-cost carriers from completely dominating the market. But what about airlines that do not fly on a daily basis?

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We take a look at the situation within the Baltics and how airlines are positioned within the region. First up are the scheduled airlines, namely airBaltic and Nordica.
 

Charters

When we talk about airlines registered in these three countries, charter airlines absolutely dominate the charts. Out of 12 airlines that are registered in the Baltics, 10 of them offer various ACMI, wet or dry lease solutions for airlines or tour operators.

Non-scheduled traffic has grown significantly. For example, throughout Lithuania’s three airports (Vilnius (VNO), Kaunas (KUN), Palanga (PLQ)), non-scheduled passengers accounted for 11.5% of traffic in 2017. In 2018 the number rose to 14.1%, an increase of 261 006 passengers onboard chartered flights, according to the statistics provided by Lithuanian Airports.

Charter airlines enjoy partnerships with travel agents, as during the summer months, the passenger numbers increase significantly. For example, Vilnius Airport (VNO) served an average number of 325 830 passengers during Q1 of 2018. But during the summer of 2018, the airport saw an average of 480 801 passengers per month.

Anyhow, we can note two airlines that could spark interest – KlasJet and GetJet Airlines.

KlasJet operates seven VIP configured aircraft, five Boeing 737 and two Bombardier aircraft – a Challenger 850 and a CRJ200. KlasJet just recently added two 737. The unique part about these two aircraft is that the airline operates it with a flexible cabin configuration. LY-FLT is an all-business-class aircraft, with a cabin thats “transformable between 68 and 104 business class seats”. The second newest addition, LY-BGS, will operate an all-economy layout for the summer season but will switch into “a 68-seat business class cabin” after the summer.

Other, bigger charter airlines are SmartLynx (with two separate AOC in Latvia and Estonia) and Avion Express. Both airlines exclusively operate the Airbus A320 family, with 42 aircraft in total between the three airlines.

So, now that the introductions are out of the way, how was the first half of 2019 for charter airlines in the Baltics?

Expanding horizons

First things first, two charter airlines established subsidiaries in Malta. Both Avion Express and SmartLynx have expanded into Malta and acquired AOC’s in the small European island.

In the press release, the CEO of Avion Express has noted that “Malta is an FAA-approved country which gives us access to the US market and opens a lot of opportunities to strengthen our leading position as a global ACMI provider on narrow-bodies.”

The CEO of SmartLynx Airlines has stated pretty much the same reason – a Maltese AOC gives an airline the opportunity to work with clients based in the United States.

The grounding of the Boeing 737 MAX has provided numerous opportunities for ACMI operators, as airlines had to quickly replace the aircraft. Back in May of 2019, Avion Express has highlighted this fact when they announced that they’re partnering up with Norwegian and will provide the low-cost carrier with four Airbus A320 aircraft. Avion Express showcased 5% production growth in H1 2019 and a record aircraft in its fleet – overall, the airline operates 22 Airbus A320 in Summer 2019.

Meanwhile, SmartLynx also enjoyed a year of growth. Following growing profits and passenger numbers in 2018, the charter airline added eight Airbus A320 family aircraft to keep up with the demand. But it seems like SmartLynx will have new owners if the Competition of Council of Latvia approves the deal. Procyone FZE, a holding company registered in the UAE, has presented plans to purchase Smart Aviation Holdings, the parent company of SmartLynx and its branches in Estonia and Malta.

The highlight of GetJet’s year is obviously the arrival of the first wide-body aircraft registered in the Baltic States. The Airbus A330, which arrived back in February 2019, has already found a new home under Tunis Air’s colors, as GetJet secured a contract to base the A330 in Tunis for the Summer. 

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But as the summer closes, so do many of the opportunities for the aforementioned operators, as their main clients put their seasonal routes to bed.

Chartering the winter

For charter and ACMI airlines, this means looking for new opportunities around the world are key to survival.

Firstly, the move to establish subsidiaries in Malta, as Avion Express and SmartLynx did so, can help explore new horizons, especially in the United States.

Secondly, the extremely high utilization of aircraft during the summer months can put a strain on the condition on the aircraft, so wintertime can be the perfect opportunity to refresh the fleet. Mechanical issues to a big portion of the fleet can be a major threat to airlines, especially to those that are operating under tight profit margins.

While demand drops in the Northern Hemisphere, the Southern Hemisphere experiences much different weather. Thus, aircraft and airlines shift their operations to Asia to serve the increasing demand there, where more opportunities arise, as the economy of the region grows further.

For example, Avion Express has leased two of their Airbus A320 to Sky Angkor Airlines, a Cambodian airline. The two aircraft registered LY-VEH and LY-VEN have served Sky Angkor during the winter of 2018/2019.

Before declaring bankruptcy, Small Planet Airlines also had a subsidiary in Cambodia. In addition, the airline also had experience flying in India, as Small Planet Airlines operated flights for IndiGo.

Thus, opportunities are always there for airlines that do not operate scheduled flights.

Year of changes

While simply put every charter airline in the Baltics showcased sustained growth, H1 2019 has brought out significant changes within the market. GetJet kicked the door open with their A330, but the news that SmartLynx is getting new owners will only intensify the competition between the three biggest ACMI operators. However, due to the nature of the business model, winter will be much calmer than the warm summer months of the year.

The Boeing 737 MAX groundings provided an opportunity to grow, yet at the same time can be a threat. If everything goes according to Boeing’s plans and the MAX will serve passengers once again in Q4 2019, it might complicate the situation for operators that used the opportunity to add new aircraft to their fleet. Too much capacity in an overly saturated market with the winter downturn can start off a chain of events that can end in very dire consequences. Furthermore, airlines are not too keen to continue wet-lease agreements that increase operational costs and might be detrimental to route profitability.

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Citing unfavorable market conditions due to the 737 MAX groundings, Norwegian Air has decided to cut its flights from Dublin, Cork and Shannon to North American destinations.