Entrepreneurs believe Lithuania is losing millions because of bad flight connections. The government has chosen to solve the problem with subsidies to private carriers, although setting up a national airline – like airBaltic in Latvia – is ever on the table.
In November, Lithuania was rocked by the news that Brussels Airlines had cancelled Vilnius-Brussels flights. Last month, Ryanair, the budget airline with about 50 percent of the market in Lithuania, decided to cut flights, protesting planned airport fee hikes.
According to the IATA Air Connectivity Score, Lithuania ranks only 95th in terms of air connectivity. The country is ahead of Estonia (105), but behind Latvia (85).
Losing millions?
Rolandas Valiūnas, a lawyer and chairman of the board of the Investors Forum, believes that air travel from and to Lithuania is inconvenient and sometimes there are no flights at all to desired destinations.
“Flying is not only inconvenient, but sometimes impossible. For local entrepreneurs it might be a matter of inconvenience, but when it comes to foreign businesspeople and investors, it means lost investment,” says Valiūnas.
He says that last year alone he knows of at least two foreign companies that gave up plans of doing business in Lithuania because of inconvenient flights.
He points out that it is not only the number of destinations that matters for business, but also the flight times.
“There is a flight from Lithuania to Zurich, but not every day. A businessperson expects to be able to fly to the right country in the morning and return to his family in the evening. For example, there are many convenient flights from Riga between 7 and 9 in the morning, but only 2 from Vilnius,” says Valiūnas.
In particular, he believes, Vilnius should be better connected with Tallinn (there are flights, but late at night), Helsinki, Stockholm, Copenhagen, Oslo, Brussels, Paris, Amsterdam, Rome, Vienna, and London.
“Moreover, if we look at important German cities – Berlin, Hamburg, Frankfurt, Dusseldorf – on some days there are flights from Vilnius and on some days there are no flights at all. [...] It would be great to have direct flights to New York and Washington, but it is almost unrealistic,” says Valiūnas.
Vida Staskonienė, director Investment Development Department at the government agency Invest Lithuania, agrees that accessibility is one of the factors that makes a country attractive.
“A convenient flight to Lithuania can be the beginning of a successful business visit and encourage international companies to consider Lithuania more often and more seriously as a potential place for business expansion,” she says, adding that “accessibility in itself is rarely a decisive argument”.
National airline
One way to make flying more convenient is to set up a national airline. Lithuania tried it at least twice, but quite unsuccessfully both times. Proponents of a national airline point the finger at Latvia, which has more destinations and more convenient times serviced by the state-owned airline airBaltic.
But it does not come cheaply. During the pandemic alone, Latvia gave some 250 million euros to airBaltic, Poland subsidised its airline LOT with 650 million, Germany extended more than 6 billion to Lufthansa, and France and the Netherlands gave 3.4 billion to AirFrance-KLM.
Tālis Linkaits, Latvia’s former transport minister, tells LRT.lt that Latvia’s decision to have its own airline is expensive, but necessary.
“Latvia’s goal is to become the aviation centre of the region, and the national airline is making a significant contribution to this. I am proud of airBaltic’s work, its current and future plans, and believe that Latvia is on the right track by having and supporting its own air carrier,” the former minister believes.
He notes, however, that it is not profitable to have a national airline that serves only the needs of one country. This is why airBaltic has bases in Tallinn, Vilnius and recently opened one in Tampere, Finland, and has charter and ACMI operations, Linkeits says.
He notes that while a national carrier helps to provide more convenient flights from Riga Airport, there is a continuous political debate in Latvia about whether a national carrier is not too expensive a way of ensuring accessibility.
Lithuanian Airports, the company that manages the country’s three international airports, notes that while Lithuania is one of the leaders in aviation growth in the region, there may indeed be a shortage of convenient flights for business.
“Although there were almost 100 destinations in 2022, we are also aware that existing measures to attract new airlines or destinations to strategically important routes for business are not always sufficient. Therefore, a new flight promotion model, which is being prepared now, will be aimed at improving accessibility in general and developing new and existing flight destinations that are particularly important for business travellers,” says Aurimas Stikliūnas, director general of Lithuanian Airports.
He notes that business flights are a very specific part of the market, so it is necessary to invest in additional incentive programmes for airlines and direct these investments towards destinations that are a priority for the country, but which at present are underserved due to low demand.
The Lithuanian government has chosen the strategy of subsidising new routes serviced by commercial airlines, but it has only allocated 2 million euros in this year’s budget instead of the requested 5.9 million.
National airline?
Stikliūnas believes that another attempt to create a national airline would not be the most effective solution.
In his opinion, it would even be a step against general aviation trends. Feasibility studies and developments in the industry show that national carrier cost their countries tens and even hundreds of millions annually, with high risk of that the business model may be unviable. Which is why Lithuania chose the “risk sharing” model of subsidising desired routes.
Transport Minister Marius Skuodis said Lithuania could only reconsider the idea of a national airline if private businesses contributed at least 50 percent of the total cost.
Meanwhile Valiūnas, of the Investors Forum, is convinced that Lithuania should establish a base carrier. This would be a private carrier based at one airport and operating most of the fleet from there, with the state contributing to the planning of certain flights and acquiring a stake in the company.
A flight to London creates 2,000 jobs
Aviation expert Simonas Bartkus says that there are as many flights from Lithuania as there is demand for. However, supply can stimulate demand.
“So the question is whether an increase in the number of flights will lead to an increase in the number of passengers, or whether there should first be a demand and then there will be more flights,” Bartkus says.
Latvia’s example shows that it is very expensive for a government to own an airline, so Bartkus believes it would not be the best solution for Lithuania. It would be much better to look for opportunities to contribute to financing individual flights.
One example of this is government-subsidised flights from Vilnius to London City Airport, serviced by the Polish airline LOT since 2019. According to Karolis Žemaitis, deputy minister of economy, Lithuania has spent 10 million euros on this route since 2019, but the benefits are many times greater.
“According to Invest Lithuania, investors encouraged by this flight to choose Lithuania have already created around 2,000 well-paid jobs, and this figure could double if the investors’ plans come to fruition. Most of them are business service companies,” according to the Ministry of Economy.
The Lithuanian aviation roadmap aims to have at least 150 direct flights from Lithuania by 2030. The current figure is 98.
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