Exclusive interview with CEO of airBaltic Martin Gauss to Interfax-Ukraine

Text: Alyona Manzhelo

 

Considering frequent statements on the possible resumption of flights in Ukraine, your visit is perceived as another powerful sign that this is possible. Is this your first visit to Ukraine since the beginning of the full-scale invasion?

Yes, this is my first visit to Ukraine since the beginning of the full-scale invasion. I initiated a meeting with the top management of Kyiv-Boryspil Airport to discuss the possible resumption of flights to Ukraine, and we were warmly welcomed. During the visit, we had the opportunity to discuss with Oleksiy Dubrevskyy, CEO of Boryspil airport, the safe resumption of flights as well as to present plans of airBaltic for restart flights to Ukraine. We also observed the high level of the airport’s infrastructure readiness.

We arrived in Kyiv to say that we have a clear plan: as soon as Ukraine's airspace is open, we will immediately start our flights. In the first phase, we will operate flights to Ukraine from the three Baltic countries, which, in turn, are connected to many European destinations. This year airBaltic will operate 130 routes in its network from airBaltic home base cities. In the second phase, in a three to six-month term after the resumption of flights, we plan to base several aircraft in Kyiv. This fleet will operate flights to European capital airports and central markets.

So, will you fly to Ukraine from the three Baltic countries in the first phase?

In the first phase, our plans are aimed at establishing flights between Ukraine and Riga in Latvia, Vilnius in Lithuania, and Tallinn in Estonia. We will initially connect the three Baltic countries with Boryspil and Lviv airports. At the moment it is not known whether they will be opened simultaneously or only one of them at the beginning.

In particular, we have 19 focus airports outside the Baltic states. They serve mostly capitals and big industrial centers. We have a well-developed hub in Riga, from which we operate flights to around 80 destinations. Flights to 24 direct destinations are operated from Estonia and 15 from Lithuania.

The Ministry for Communities, Territories and Infrastructure Development of Ukraine (Ministry of Infrastructure) shared the information that you also had a meeting with Oleksandr Kubrakov, Deputy Prime Minister for Restoration of Ukraine. What was the focus of your conversation?

With the Ministry's team headed by Oleksandr Kubrakov, Deputy Prime Minister we discussed the prospects of resuming airBaltic’s flights to Ukraine. We do hope that our firm intentions will support the regulators in deciding to open Ukrainian airspace as soon as possible.

It was a historic visit for me, I would say. I had never presented an airline’s business plan in the shelter of an airport before. At the moment when I was supposed to present it (to the airport management - IF-U), an air raid alarm sounded, and we had to move to the shelter. I continued my presentation there.

Our teams stay in touch. We are looking at how we can help and support the process of restoring the aviation industry in Ukraine. 

The Ministry of Infrastructure said on Facebook that airBaltic is a long-standing and reliable partner of Ukraine. Since 2019, the company transported passengers from Boryspil and Lviv airports - in total, more than 300 thousand passengers were transported. The airBaltic aircraft was the last to leave Boryspil airport in February 2022, before the airspace was closed...   

"We were one of the last airlines to continue operating scheduled flights to Ukraine (before the full-scale aggression, amid US warnings, some airlines have suspended flights to Ukraine - IF-U). I remember that day very well because I was interviewed by Richard Quest for CNN. At 11 p.m. (23:00 Kyiv time - IF-U), he asked me how we ensure the safety of our aircraft in Ukraine. I replied that we were constantly monitoring the situation and we would have canceled the flight in time (in case of a real threat - IF-U). In the end, we just did so.

We canceled the flight in the early morning when the full-scale war in Ukraine started and the airspace was closed.

In that interview, I also publicly stated that airBaltic is a reliable partner of Ukraine and I am ready to repeat that now. Today we are here to demonstrate that we have not forgotten what we said two years ago. Those were not just words. We need to remain confident that our intentions are serious and we will implement them as soon as we receive a permit to resume flights from Ukraine. 

Before the war, you worked with airlines under codeshare agreements - do you plan to return to this form of cooperation now?

Yes, Ukraine International Airlines was our partner in Ukraine for the joint operation of flights in Ukraine. Upon our return, we will certainly be interested in working with Ukrainian air carriers. In total, we currently have codeshare agreements with 23 partners, which include almost all major air carriers: Lufthansa, British Airways, KLM, Air France, Emirates Airlines, and Turkish Airlines.

Do you plan to resume flights according to the codeshare scheme or will you operate your own flights in Ukraine?

No, we want to run our own flights. Of course, if someone else operates the same route as we do, then we will consider the possibility of concluding a code-sharing agreement. However, this can only be discussed under two conditions: when there is a real connection and real carriers on it. We will consider potential codeshare agreements only when flights resume and it is clear which routes we operate and which carriers work on other routes. 

How many AirBaltic aircraft will there be when you return to Ukraine and where will they be based?

We are going to cooperate with Kyiv-Boryspil, Lviv, and Odesa airports. In the long term, we can base five aircraft in Ukraine to operate a wider network of routes. 

So, first of all, we will start with the fleet, which we have in Riga, and, in particular, our planes, which are parked overnight - we will free up these available capacities. But in the long term, in three to six months after restarting operations, we are thinking about basing five of our aircraft in Ukraine. 

Will these aircraft be new?

All of our aircraft are new. After all, airBaltic has the youngest fleet among airlines today, the second youngest in Europe. Moreover, we have placed a new order for aircraft - we will potentially receive another 50 brand-new planes by 2029. Some of them will operate in Ukraine as well. We will receive three aircraft under the new order by the end of 2024. We placed this order in November. 

In previous years, AirBaltic's fleet received one new aircraft monthly. That is why today we are a growing airline that is expanding dynamically. We are interested in returning to Ukraine's airspace, as this is a very important market for us. Frankly speaking, we estimated to return earlier, but the Ukrainian sky has remained closed for too long.

Do you plan to visit the airports in Odesa and Lviv during your current visit? 

I am not planning to visit them during my current visit.  I am returning to Riga as I already have other commitments. However, representatives of our local team in Ukraine will definitely visit the airports in Lviv and Odesa in the near future. I understand that these airports, including Kyiv-Boryspil Airport, are considered to be the first ones that can resume operations once the Ukrainian sky is open. If the airspace is safe in only one zone, then perhaps only one airport will operate flights first. I believe we will find out soon, we are expecting rapid developments.

Did airBaltic's representative office in Ukraine interrupt its work during the full-scale war? 

Not for a moment. During the full-scale invasion, we even expanded the responsibilities of the representative office in the markets. Of course, we have passengers from Ukraine who book tickets and continue to fly with AirBaltic from airports outside Ukraine.

During his visit to Kyiv, Michael O'Leary, CEO of Ryanair, said that after the resumption of flights to and from Ukraine, he would offer 1 million, or 20%, of tickets for less than 20 euros. Have you calculated the price of AirBaltic tickets?  

Sure, we also calculate ticket prices. In aviation, ticket prices start with very low ones and there is a business class where tickets are more expensive. This is dynamic pricing. So, there is no single price for everyone. In Ukraine, we will set a reasonable ticket price. 

By default, an airline is more attractive to passengers when it offers cheap ticket prices. But, in general, we are not an airline with high fares. I know some of our competitors are very aggressive with low ticket prices but when you book the last seat in the cabin, it turns out to be a very expensive ticket. 

I am not saying now that by resuming flights to Ukraine we will change our operating model. Instead, I can assure you that we understand the economic situation in Ukraine and that we will not be able to sell too expensive tickets. The price has to be right. 

AirBaltic isn’t a typical low-cost carrier, is it? 

Yes, we consider ourselves a low-cost airline, but it's better to define us as a hybrid airline because we do the same thing as a low-cost carrier in an economy cabin. You buy a low-cost ticket from us, but you pay extra for your suitcase and other additional services. We also have a full-service business class on our planes. We have both segments combined in one aircraft, just like a legacy carrier.

In his interview, Dmytro Seroukhov, CEO of the Ukrainian carrier SkyUp, told us that they are also focusing on the hybrid model. By the way, this airline also has a firm intention to resume flights from Ukraine as soon as the sky is open...

I think a lot of airlines are trying to implement this model. But to do it right, you need to keep your costs under control. You also need to provide everything that passengers want in business class, and that's not easy if your airline doesn’t have all the prerequisites. Our model is very efficient - we achieve low unit costs. So, we have a hybrid model, and that has made us very successful as an airline.

The issue of insurance is crucial in the current situation. What is the position of insurance companies? Have you discussed the possibility of resuming flights to Ukraine with them?

You can talk to an insurance company when it is clear when and where you want to fly. Today we cannot fly to Ukraine because it is still prohibited. However, as soon as EASA confirms the airspace is safe, we can immediately start talking to insurance companies - the rules they apply to the aviation industry in Europe are unified and the same for everyone.

What are your feelings about the visit to Boryspil Airport?

Impressive! The airport is now in full readiness to resume operations. It looks like a brand new one – it is very clean. We were shown different operational procedures, including the ones that can be applied to the protection of passengers, visitors, and staff. This made a very positive impression. Among others, we inspected the check-in procedure and boarding at gates and looked at the operations of aviation security. Everything – beginning with the runways up to the duty-free shops - is ready to resume operations, even tomorrow.

Discussions are underway now on whether it is worth spending money on maintaining a high operational state of the airport or to allocate to other needs. What is your opinion?

Ukraine requires functioning airports. It is crucial. It is vital to maintain airports. If you lose them now, you will have no civil aviation for many years. Maintaining the infrastructure is essential, it is important to support the people who work at the airport now because later it will be very difficult to find highly qualified personnel for the aviation industry, meeting all the requirements of flight safety and passenger security, operational equipment, all the complex technological processes. Your airport is not a provincial railway station. It is a very complex high-tech environment that needs to be maintained being an essential component of civil aviation. This is very important for the future. I hope that Ukraine is aware of this and gives it priority. I understand that right now the main goal should be to protect the country and win the war, this should be the number one priority.

However, if you can keep the airport infrastructure operational, it is very important to do so for the sake of the long-term perspective.

Can you tell us about cases from other countries where maintaining airports during the war has yielded positive results or vice versa?

I do not have such experience from the top of my mind. This is the first war in Europe in my lifetime. Therefore, I cannot give you a single example of a country that was at war after the end of World War II.

How do you assess the Ukrainian air transportation market after the resumption of flights, taking into account the strategy of rebuilding Ukraine and restoring its infrastructure? This primarily concerns the return of Ukrainian refugees home, cargo transportation, and the growing demand for inbound tourism due to the interest of foreigners to Ukraine, as well as investors. How do you take this into account in your transportation strategy to and from Ukraine?

We expect high demand for passenger transportation. Today, more than 6 million Ukrainians remain abroad, perhaps not all of them will come back, but they will want to see their friends and relatives, and they will not want to travel by train for 20 hours if they can fly by plane.

I personally came to Kyiv by train. It took 17 hours, a very long trip. We traveled from Latvia to Warsaw by air for an hour and then traveled 17 hours by train. An aircraft could have covered this distance in just one hour.

Business activity continues to be high in Ukraine, so businessmen will use airplanes. There will be tourists. People will go on vacation. After this war is over, Ukraine will experience strong growth.  airBaltic wants to play a significant role in all these processes.

Latvia has very strong ties and a special relationship with Ukraine, providing your country with firm support in the fight against the aggressor. We are also situated at the border and feel the impact of Russian aggression. Therefore, Latvians understand and feel the situation in Ukraine deep in their hearts. And our desire to resume flights from Ukraine is one of the facets of this understanding.

Do you think many European airlines will be ready to join the first wave of those who resume flights as soon as the sky in Ukraine is open?

There are many successful airlines in Europe now. Since Ukraine's accession to the EU is a long-term perspective and Ukraine will definitely become a part of the EU, I will be happy to see all these companies on the Ukrainian market. You have a big country, I come from a country with 1.8 million inhabitants, and we are very successful there. Therefore, considering the size and power of the Ukrainian market, I would say that Ukraine will be of interest to many airlines.

AirBaltic is the national airline of Latvia. Can such a business model exist now? Before the war started, Ukraine was planning to create a new state-owned airline - a national carrier. Do you think it makes sense for us to return to this project? What are the advantages of state ownership of the airline?

My answer is yes. The state can be a successful shareholder. airBaltic is the best example, with better than ever financial results in the last 28 years of history after COVID and during the war. But of course, it depends on how you establish your airline, how much you invest, how available the financing is, and what your business model is. The shareholder only provides the financial resources, but the airline is run by its management.

We have grown a lot in recent years. Latvia today has only 1.8 million inhabitants, and airBaltic carries four times as many passengers. We have 47 aircraft in our fleet and, as I said, we plan to operate 100 by 2030.

We are developing our business model, which is very successful. After all, Latvia does not have a high-speed railway system or a motorway network that would provide fast connections to European countries. Nevertheless, maintaining these connections is of great importance for the GDP of Latvia, as well as Estonia and Lithuania. That is why we operate flights from all three Baltic countries.

Will you enter the Ukrainian market after the resumption of flights with Lithuanian staff, transfer your Ukrainian employees to Ukraine, or rather recruit new staff – what is your opinion and how do you plan it?

About 2.5 thousand employees are at the airline now, and 3% of them - 75 people - are citizens of Ukraine. They are engaged in various fields. We continue to recruit staff because we expect strong growth to 5 thousand employees over the next five years when we will receive all ordered aircraft. So, we will recruit technical staff, flight attendants, and pilots and here we are open to all nationalities. In total, our airline employs people of more than 30 nationalities.

Could you assess the impact of the war in Ukraine on air transportation in Europe and in the Baltic States in particular?

Certainly, this war unleashed by Russia has had a great impact not only on Ukraine but on all European countries. I am German by origin and I understand well what the war leaves in the history of the country, and how negatively its echoes can be many years after the end. As for the aviation industry, the negative impact is that we all no longer have access to the Ukrainian air transportation market, people from here cannot fly, and airlines are forced to bypass Russian, Belarusian, and Ukrainian airspace, which makes flights longer and more expensive.

Finnair in Finland, as well as in the Baltic States, has suffered the most because of its proximity to the Russian border.

In the case of airBaltic, 7.3% of all our passengers before the full-scale invasion were from Ukraine. Today, we do not have these passengers, and therefore, we do not have any revenue from them.

The commitment of European airlines is to help Ukraine recover. So, maintain your airports, we will fly back - we will help you to restore your country.

I am confident we will soon see all European airlines and not only low-cost airlines return to Ukraine - Turkish carriers will also return. All large, medium, and small carriers will be here. Maybe not all at once, but one by one. And I am sure that in the future we will see more passengers at Ukrainian airports than ever before, more even than in 2019. After all, you are a great country with heroic people who are giving a powerful rebuff to Russian aggression.