Air Lituanica Secures E-Jet Leases for Business Launch

Lithuanian start-up Air Lituanica has entered into a partnership with fellow Baltic operator Estonian Air to support the carrier’s business launch at the end of June 2013. The carrier has opened reservations this week ahead of a proposed June 30, 2013 launch on routes linking the Lithuanian capital, Vilnius, with points across Western Europe, Scandinavia, Russia and CIS.

Air Lituanica hopes to succeed where previous national entities Lithuanian Airlines and flyLAL have failed by establishing a sustainable network of routes from the Lithuania. The carrier hopes to overcome the problems of its predecessors and help establish new air services in the country but rather than establish itself as a large national entity, instead plans to fly small regional jet equipment on high frequency routes to key destinations where there is both leisure, but most importantly, corporate demand.

The airline, which takes its name from the small aircraft that was flown by Lithuanian aviation pioneers Steponas Darius and Stasys Girėnas across the Atlantic Ocean in 1993, is partly supported by the State with the Vilnius City Municipality holding a 34 per cent shareholding, although a local strategic investor will hold a controlling 49 per cent equity stake. The remaining 17 per cent of the airline will be split between Lithuanian businesses, enterprises and individual private investors.

The niche business carrier will begin flying from its Vilnius base with two leased Embraer E-jet aircraft – one E170 leased from Estonian Air and one E175 leased from Embraer’s internal remarketing business ECC Leasing. Its first route will be the Belgian capital, Brussels, which will be served six times weekly from June 30, 2013, while daily flights to Amsterdam will follow from July 8, 2013 and four times weekly services to Berlin will follow from August 5, 2013. The first phase of its network development will also see services to Moscow, Munich and Prague introduced with later development seeing expansion into Scandinavia, Lithuania’s biggest trading partner, perhaps using smaller equipment.

“Our first destinations are going to be Brussels, Amsterdam and Berlin and also later going to operate to Munich, Prague and then Moscow. These six destinations should be good for a start,” Simonas Bartkus, Chief Commercial Officer, Air Lituanica, revealed during the Routes Europe forum in Budapest, Hungary in May 2013. “We are going to offer two classes, service level travel, which will be like economy with check in and luggage allowance, somewhere between economy and economy plus. Then there is premium class, which is more like first class and includes fast track.”

The airline’s launch is being supported by Estonian Air with initial flights being flown using Estonian’s ‘OV’ flight code but being branded as Air Lituanica. This is due to the start-up not yet securing its own operating licence and flying on the Air Operator’s Certificate (AOC) of its Baltic partner. In addition to the lease and crewing of the 76-seat E170, which will remain in place through 2015, Estonian Air and Air Lituanica will cooperate in providing commercial services, like sales of tickets on point-to-point and connecting flights, revenue management, interline and codeshare agreements.

According to Erikas Zubrus, Chief Executive Officer of Air Lituanica the partnership with Estonian Air is key to getting the business off the ground, enabling the start-up to start operations with already working booking channels and agreements with partner airlines. “Air Lituanica has chosen Estonian Air as a commercial partner to ensure a wide distribution network throughout the world and to offer connecting flights starting from Vilnius to more than 100 cities,” he said.

In the future the carrier plans to expand its fleet to four or five aircraft serving between ten and 12 destinations from Vilnius. It is understood to be keen to partner with airlines not represented in Lithuania’s market, such as Air France, airberlin, Czech Airlines and KLM, while Air Lituanica’s shareholders are also believed to be open to the idea of investment from other parties to support its development.

An analysis of historical Lithuanian flight schedules shows that all six of Air Lituanica’s initial destinations have been regularly served from Vilnius over recent years with two of the markets currently being served by foreign airlines. The carrier’s launch route to Brussels was formerly served by flyLAL up to October 2008 and Latvian carrier airBaltic between April 2007 and January 2009 when it had a Vilnius base, and has been subsequently taken over by Brussels Airlines. The Russian capital is also served directly from Vilnius with Aeroflot offering flights to Moscow Sheremetyevo, Transaero to Moscow Domodedovo and UTair to Moscow Vnukovo.

The airline’s other planned routes were also regularly served: Amsterdam was served by flyLAL up to December 2008 and then Estonian Air in 2010 and 2011; Berlin was linked by flyLAL, airBaltic and most recently by City Airline in 2010; Munich was served regularly from Vilnius by airBaltic between October 2004 and March 2011; while Prague has been linked to the Lithuanian capital by Czech Airlines for over ten years but the linked was closed in January 2013.

Since the three Baltic States of Estonia, Latvia and Lithuania gained independence from the Soviet Union in the early 1990s the aviation industry in Lithuania initially failed to record the growth levels of its neighbours, as the table below highlights, due partly to the lack of a strong local operator. However, growth from low-cost carriers during the past decade has slowly enabled the market to partly fulfill its potential. Based on this year’s schedules Ryanair is the largest international carrier from Lithuania with a 40.3 per cent share of the available seat capacity this year, followed by Wizz Air with a 15.4 per cent share.

In the early 1990s Lithuania was actually the largest of the three Baltic markets accounting for 46.5 per cent of the international flights from the three countries. However, just ten years later it had the smallest international aviation market in the region, constituting just 32.6 per cent of the total seat capacity from the three Baltic States. This share subsequently declined to 25.5 per cent in 2010, but recent route developments and restructuring of networks in Estonia and Latvia has meant this started to grow again from 2011.

In the table below we look at the largest O&D country markets from Lithuania in 2012 and how this has changed since the previous calendar year. Our analysis shows that total international air passenger demand from Lithuania has risen 18.6 per cent between 2011 and 2012 from around 2.7 million to approximately 3.2 million passengers, respectively. The United Kingdom is the largest market accounting for around a quarter of this demand driven by the regular operations of low-cost operator Ryanair and Wizz Air. London’s Stansted Airport and Luton Airport are the largest individual foreign destination markets from Lithuania, followed by Dublin, Riga and Bergamo.