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PP RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHRA #0671/01 3081533
ZNR UUUUU ZZH
P 031533Z NOV 08
FM AMEMBASSY RIGA
TO RUEHC/SECSTATE WASHDC PRIORITY 5351
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 02 RIGA 000671 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAIR ECON EFIN ETRD LG LH
SUBJECT:  Lithuanian airline files suit against AirBaltic 
 
¶1. This is a joint cable from Embassies Riga and Vilnius. 
 
¶2. Summary: Private Lithuanian airline, FlyLAL, and Latvia's 
national airline, AirBaltic, are involved in an increasingly nasty 
dispute centered on AirBaltic's pricing of flights out of Vilnius. 
FlyLAL alleges that AirBaltic is using the deep discounts it 
receives for gate fees in Riga to subsidize fares from Vilnius at 
less than cost.  FlyLAL succeeded in getting a Lithuanian court to 
order the seizure of some AirBaltic assets in Lithuania in a 
proceeding that did not meet minimum standards of transparency. 
Riga Airport subsequently suspended FlyLAL's flights from Riga to 
Vilnius for purported unpaid debts.  The case even has the two 
governments sniping at each other and is an example of how competing 
economic interests are more important today than old standards of 
Baltic unity.  End summary. 
 
¶3. Tadas Vizgirda, Executive Vice President and General Manager of 
AirBaltic Lithuania, confirmed to Embassy Vilnius that FlyLAL has 
brought a legal claim against Air Baltic and Riga Airport in a 
district court in Vilnius.  FlyLAL is claiming that the discounts 
AirBaltic is receiving at Riga Airport violate EU competition laws. 
FlyLAL further argues that these discounts have given AirBaltic an 
unfair competitive advantage enabling it to subsidize its flights in 
Vilnius, which FlyLal believes are priced below market level.  As a 
result, FlyLAL asserts it has suffered USD 80 million in losses.  To 
secure compensation from AirBaltic and Riga Airport, FlyLAL made a 
request for the court to freeze some of Air Baltic's assets.  The 
District Court of Vilnius granted this request. 
 
¶4. Vizgirda relayed AirBaltic's position that the case is not 
legally sound due to jurisdiction issues and the fact that AirBaltic 
was never informed of the proceeding.  CEO and President of 
AirBaltic, Berthold Flick, publically noted that discounts on fees 
at Riga Airport are awarded based on flight and passenger volume in 
accordance with regulations issued by the Latvian Cabinet of 
Ministers, and added that other airlines, including KLM/Air France 
and Ryanair also receive these discounts. He added that AirBaltic 
has begun the process to appeal the judgment of the Lithuanian 
court. 
 
¶5. As the case has proceeded, the two governments have begun taking 
shots at each other.  Latvian transport minister Slesers, who has 
the Riga airport and AirBaltic at the heart of his vision for 
development of Latvia and its capital, accused the Lithuanians of 
inconsiderate behavior, noting that Latvia has never sued a 
Lithuanian enterprise operating in Latvia, and went on to say that 
FlyLAL would not benefit from the legal action as it is near 
bankruptcy and will be out of business soon.  The Lithuanian 
transport minister responded in a press release that "Slesers' 
statement regarding FlyLAL is unfounded and forms an unfavorable 
opinion about the Lithuanian company.  Such comments by a 
neighboring country's government officials about operations of 
Lithuanian companies and their financial situation are unacceptable 
to Lithuania." 
 
¶6. This is not the first time that the question of landing fees at 
Riga airport has come up.  In November 2006, Austrian Airlines, 
Czech Airlines, Finnair, British Airways, Lufthansa and KLM 
submitted a petition to the Latvian Competition Board claiming that 
the discount system in place at Riga Airport violates EU competition 
regulations.  The Board ruled in favor of the airlines and required 
that the discounts be eliminated.  The Latvian Transportation 
Ministry, however, filed an appeal with the County Administrative 
Court and the court set a review date of September 23, 2008. 
Following a request for change of court jurisdiction by one of the 
parties, the County Administrative Court decided to transfer the 
case to the District Administrative Court, which plans to review the 
case by October 1, 2009. 
 
¶7. For its part, Riga Airport on the morning of October 26 suspended 
flights of FlyLAL to Vilnius, claiming that the company had not paid 
its bills and, according to press reports, seized the last FlyLAL 
plane in its terminal.  An airport spokesperson said that FlyLAL has 
not settled debts at the airport since the middle of summer and has 
not shown any desire to make an agreement on settling the debts.  In 
response, Baltic News Service said that Vytautas Kaikaris, the 
Director General of FlyLAL, told them that FlyLAL has no past-due 
debts with Riga Airport, and that he believes that the decision of 
the airport to suspend FlyLAL's flights to Vilnius is in revenge for 
FlyLAL's claim against AirBaltic and Riga Airport.  The Press 
reported that on October 27th FlyLAL paid 40,000 Euros to secure the 
release of the plane impounded the previous day.. 
 
¶8. Comment: The case brought by FlyLAL in Lithuanian court seems 
more a show than anything else.  The idea that a hearing could be 
held and property ordered seized without the defendant even notified 
of the proceeding - and that AirBaltic assets could be seized to 
punish Riga Airport - does not meet any basic standard of 
jurisprudence.  But the case itself and the reaction between the 
governments, much like the back and forth over the proposed 
electricity link from Sweden, is evidence of the limits of the 
 
RIGA 00000671  002 OF 002 
 
 
Baltic unity that we all too often assume continues to motivate 
relations between regional governments. 
 
 
Larson