Air Lituanica bankruptcy | True Lithuania
True Lithuania

Lithuania’s only scheduled airline ends services

2015 05 22. Air Lituanica - the only remaining Lithuanian scheduled airline - has ceased operations today. It served routes from Vilnius to Paris, Berlin, Munich, Brussels, Prague, Billund, Amsterdam and Tallinn and aimed to satisfy business customers.

Initial troubles at Lithuanian aviation (2004-2009)

Air Lituanica became the 5th scheduled Lithuanian airline to fold over the course of the decade.

The main problems of Lithuanian aviation sector began in 2004 when the Lithuanian membership in the European Union opened up the Lithuanian market to foreign carriers. Latvian Air Baltic (then owned by Scandinavian SAS and Latvian government) subsequently based some aircraft in Vilnius airport and launched routes to the same destinations as Lithuanian Airlines, causing Lithuanian Airlines (a.k.a. FlyLAL) to go deep into the red and eventually fold in early 2009. Lithuanian government then refused to bail out FlyLAL (Lithuanian Airlines) by buying it out from private owners for a symbolic price (together with its debts).

Air Baltic also became detrimental, but its losses were eventually covered by Latvian government directly and through lower fees at their Riga hub (the Latvian government eventually bailed out Air Baltic by acquiring 100% stake). To make matters more controversial, soon after Lithuanian Airlines ceased operations Air Baltic also closed its hub in Vilnius, cancelling the flights and re-routing passengers via Riga. Arguably, this has allowed it to survive by filling emptied-by-crisis flights from Riga with passengers originating in Vilnius (economic downturn made other airlines wary of opening direct Vilnius routes).

While such so-called "predatory practices" are formally banned in the European Union, they are difficult to prove in the aviation sector, meaning that the court case of FlyLAL (Lithuanian Airlines) vs. Air Baltic dragged on long after FlyLAL (Lithuanian Airlines) became insolvent and ceased operations.

Attempts to re-launch a Lithuanian airline (2009-2015)

First attempt to restart Lithuanian scheduled aviation was low-cost Star 1 (2009-2010), which folded mainly due to the losses at an affiliated charter company. Air Lituanica, owned by Vilnius City Municipality, was the second attempt, launched in 2013 by mayor Artūras Zuokas on the popular idea that Vilnius lags behind other Eastern European capitals in direct investments, business conferences, and tourism, largely because of the limited accessibility by air.

Air Lituanica plane in its first months of operation in Berlin Tegel airport, ready to leave for Vilnius. The airline's livery included a Lithuanian Grand Duke's seal on the tail while name 'Lituanica' reminded of the Darius and Girėnas Transatlantic journey. ©Augustinas Žemaitis.

Air Lituanica never became profitable, however, its municipal funding marred in political disputes. After former mayor Artūras Zuokas was not re-elected, some have already claimed that Air Lituanica is doomed with the new mayor Remigijus Šimašius not willing to continue investment. More controversially, in the recent case, Air Baltic also has launched new routes from Vilnius similar to Air Lituanica routes, leading some to make the same accusations of unfair competition as during the FlyLAL - Lithuanian Airlines bankruptcy.

Does Lithuania need its own airline?

The position of Lithuanian aviation sector tends to be greatly controversial in Lithuania. While the popular claims that "Lithuania is inaccessible by air" are gross overstatements, they were nearly correct after FlyLAL bankruptcy and subsequent Air Baltic mass flight cancellations in 2009. Today Lithuania is still less accessible by air than Latvia (despite the latter having a considerably smaller population) and such accessibility may have helped Riga gain its "capital of the Baltics" image it now has in the West. Furthermore, the majority of services to Lithuania now are by low-cost carriers, which are typically frowned upon by business conference organizers and do not provide onwards connections to other continents.

Still, the aviation market is extremely hard to enter and it is unlikely a private carrier would be launched. In fact, both Estonian and Latvian air companies are government-owned, which had allowed them to pass through crisis times. However, having a government (or municipal) owned airline is costly, and starting a new one even more so.

Therefore, the main discussion in Lithuanian society is whether the government should fund such an airline (hoping that increased tourism and related tax income would compensate the costs) or whether Lithuania should remain airline-less. In this situation (to which Lithuania has returned today), flight services are provided by foreign carriers on a purely market basis. However, this has drawbacks:
1.Vilnius wouldn't be a hub and have no transfer passengers, meaning lower total numbers of passengers and therefore fewer commercially viable routes.
2.As it is usually financially viable for the airlines to operate only from their hubs or focus cities, there can be situations where no one services a potentially profitable route from Vilnius simply because there is no airline with a hub at the possible destination (or because the airline based there has a different strategy or inapplicable fleet).
3.While the European Union may have an "open skies market" within its member states, it does not apply to non-member countries, meaning they could (and sometimes do) prohibit non-Lithuanian and non-local carriers from operating routes to/from Lithuania, even if they are based in Lithuania.

There is also a "third position" on the "Lithuanian aviation question" which claims that not bailing out the well-established FlyLAL (Lithuanian Airlines) in 2009 was a mistake, but that launching a new airline now would be a far too costly and risky undertaking to invest taxpayers' money.

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