As Most Airlines Scrap Jet Orders, One Tiny Carrier Is Throttling Up
As Most Airlines Scrap Jet Orders, One Tiny Carrier Is Throttling Up
(Bloomberg) -- Airlines are doing everything they can to scrap or delay jetliner deliveries amid an unprecedented collapse in air travel. Not Air Baltic Corp.
The East European carrier has started talks with Airbus SE to accelerate handovers of its A220 model, Chief Executive Officer Martin Gauss said in an interview. The existing plan to assemble a fleet of 50 of the narrow-body jets by 2025 could come to fruition a couple of years early, he said.
Air Baltic is among a handful of carriers pledging to lean into the Covid-19 crisis that’s handed the industry its worst ever demand slump and led to the collapse of operators including Virgin Australia. The rebound could offer a chance to win market share, Gauss said, adding that one potential step could be geographical expansion in the neighboring Nordics.
While Air Baltic, like others, has had to temporarily idle its fleet, the carrier has been blessed by good timing. It had already decided to permanently ground some older aircraft when the coronavirus hit, and was able to bring those plans forward. It’s also standardizing on the A220, a model smaller and cheaper to operate than other single-aisles like Airbus’s A320 or Boeing Co.’s 737 Max.
Gauss predicts the A220 will be ideally suited to the tougher travel market, favoring efficiency and flexibility over size, that emerges from the pandemic.
“I always said that come the next crisis we wouldn’t be left with an aircraft that was too big,” Gauss said by phone. “Would you rather have 145 seats like the A220 or 186 on a larger narrow-body? The answer is obvious.”
Air Baltic, 80% owned by the Latvian state with Danish investor Lars Thuesen holding the rest, plans to resume flying on May 14, a day after Latvia’s travel lockdown is due to end.
It will initially serve 12 routes from Riga -- though the resumption could be pushed back a week at a time. (Industry executives say they expect low occupancy levels to persist for months.) The network, with secondary hubs in Tallinn, Estonia, and Vilnius, Lithuania, should feature 60 routes by year-end, down from 80 served by the original fleet.
Air Baltic is the third-biggest operator of the A220, formerly the Bombardier Inc. C Series, with 22 currently in the fleet. After the Covid-19 outbreak reached Europe, the airline stood down four 737s and 12 turboprops earlier than it had planned.
The carrier is slated to get four A220s in 2020, though the first due next month will be delayed with Airbus’s Canadian production line closed, Gauss said. Talks with Airbus include scenarios for accelerating future handovers, while adjusting the schedule in the near term, he said.
“We’re always in discussions with customers regarding their fleet, those discussions are confidential,” an Airbus spokesman said.
Nordic Expansion?
The carrier has 30 more options for A220s that it could convert to expand its business, most likely to the Nordic region, though Gauss said that’s not currently on the agenda. Norway’s Braathens Regional Airlines became a casualty of the virus this month, applying for a court restructuring. Discounter Norwegian Air Shuttle ASA is also hanging by a thread, with a pivotal debt-to-equity swap plan being studied by creditors.
While Airbus and Boeing have both suffered cancellations and delivery postponements, some carriers have continued adding planes to their fleet, with a few discount operators seeking to move up in the Airbus queue.
Wizz Air Holdings Plc, Europe’s third-biggest discount carrier, said this month it will take delivery of hundreds of new jetliners as planned despite idling 90% of capacity in response to the virus, including all 15 Airbus planes due this year. Chief Executive Officer Jozsef Varadi plans to position for a post-virus rebound and seize on expansion opportunities as rivals teeter.
State-owned Vietnam Airlines will also seek to accelerate jet deliveries, according to a local report.
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