airBaltic bullish on spoke growth

When it comes to creating a new base for an airline choosing a spoke on the network is an uncommon choice. And doubly so when most of the destinations served are hubs of other airlines. But airBaltic likes to do things a bit differently.

CEO Martin Gauss believes the carrier can repeat that model thanks to a unique operating model, a broad range of airline partners and cities keen to grow a far-reaching version of air connectivity.

Our product, with 150 seats and both business and economy, can go to any city with a certain need for connectivity. We are a connectivity provider.

– airBaltic CEO Martin Gauss

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Airfare for PaxEx.Aero to meet with Mr. Gauss was paid for by airBaltic. As always, our opinions remain fully independent.

A decade ago airBaltic made the decision to consolidate to a hub-and-spoke operation based in Riga, Latvia. The conversion to an all-A220 fleet helped move extend its reach, but the company remains focused on the idea of building connectivity, not just delivering point-to-point service. Faced with a COVID-induced downturn in the local market, the carrier accelerated its plans to build a new base in the Nordics.

Tampere, Finland sits a couple hours to the west of Helsinki. It is the second largest urban area in the country. But thanks to its proximity to the capital, the area saw limited air service. The major network carriers were not keen to add connectivity from their hubs.

That gap proved an opportunity for airBaltic.

The carrier established a base in Tampere, connecting to its Riga headquarters and seven other markets. Two of those – Malaga and Rhodes – target local leisure traffic. The other five, however are partner connectivity plays.

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Munich, Frankfurt, Oslo, Copenhagen, and Amsterdam represent the main hubs for three of airBaltic’s codeshare partners Lufthansa, SAS, and KLM. The carrier effectively operates as a feeder airline for all five of those hubs.

“We are not just putting an aircraft there to offer seven routes,” says Gauss. “We put the aircraft there and have access to 500 destinations with a single connection. We are a connectivity provider.”

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Perhaps Tampere grows with a second or third aircraft, allowing it to increase frequencies to the hubs. Perhaps it holds steady at one. So long as the revenues remain solid the model works for airBaltic. And Gauss believes the company can repeat it.

“We built a similar market in Tallinn with 11 destinations and a shuttle to Riga. We will put a second aircraft there when it is successful. Tampere will grow the same. And then we can go to the next city and the next city.”

The model matters

Gauss continues, “You have many cities in Europe that are not connected at all. Zagreb lost their carrier last year. They have a wonderful, huge airport but no airline. They would love to have something like this. There are many places in Europe that lack connectivity, and we are a connectivity provider. But it has to work for us financially. The market needs to have demand that matches our model.”

Read More: Delta, airBaltic to launch codeshare partnership

The business model is critical to airBaltic’s success, as well as the success of the spoke bases. “We’re not coming in, filling planes with 5 euro tickets like Ryanair and not paying anything to the airport,” Gauss explains.

More partners, more spokes

Instead, airBaltic offers interline connections with two dozen partners and two classes of service. The ability to sell onward connections with so many partners, and to deliver a premium cabin option, allows the company to extract a much higher yield.

As for the codeshare partnerships, Gauss appears especially excited about the new deal announced with Delta Air Lines last year. It remains theoretical for now, awaiting a Category 1 rating in the FAA’s International Aviation Safety Assessment (IASA) review.

Once approved, however, it will open up connectivity from a number of Delta’s destinations in Europe to airBaltic hubs. “We will have the connectivity through Paris and Amsterdam,” Gauss notes. “And hopefully one day Delta flies here directly, and that makes it even better.”

More codeshare partners means more opportunities to connect at hubs across Europe, building up new spokes where other carriers cannot support the business on their own. And, Gauss adds, “the next one is coming. Not this year, but in the future we will have more bases like Tampere where we will offer connectivity to a city.”