The losses of regional public transport carriers due to rising fuel prices caused by the conflict in the Middle East are increasing by 700,000 euros per month, so changes in flight operations may be possible from May this year, the Latvian Passenger Carriers Association (LPPA) reported to LETA.
The president of the association, Ivo Ošeniieks, notes that diesel fuel costs account for 25% to 30% of the total expenses of public transport service providers. Thus, every unforeseen increase in diesel fuel prices creates additional costs that need to be compensated.
"Currently, this is being borne by the carriers themselves; however, considering that the government has still not found a mechanism to compensate for the monthly losses of carriers caused by Russia's war in Ukraine, it is no longer possible to bear additional losses on their shoulders," emphasized Ošeniieks.
He noted that in the current situation, if the customer does not make timely decisions to maintain financial stability, carriers will be forced to seek solutions, such as using only small-capacity buses with lower fuel consumption.
Ošeniieks added that, given the insufficient number of such buses among carriers to ensure all routes, including school routes, with the current state funding, some routes may have to be operated every other day or less frequently.
The association emphasizes that, considering the lack of interest and slow resolution of the situation by the Minister of Transport, Aitis Švinks, and the Ministry of Transport, this week the association sent a letter to Prime Minister Evika Siliņa.
In the letter, the association urges an immediate decision to allocate additional funding to public transport service providers in the regional route network, while also instructing the Ministry of Transport to amend the indexing procedure for the contractual price of long-term public transport service contracts to cover unpredictable additional costs for diesel fuel.
The association emphasizes that the solution found by the government in March of this year, in the form of a one-time advance payment of 1.5 million euros, does not cover the overall increase in energy resource costs in 2026. The association also reminds that when the budget for 2026 was adopted at the end of last year, the government planned funding with a deficit of 9.2 million euros for the state-ordered public transport route network. This amount does not include the losses of carriers caused by the war in Ukraine initiated by Russia.
Ošeniieks noted that the mentioned trends have already led to direct consequences in the industry, including in the segment of commercial transport, where entrepreneurs are forced to cease passenger transport on unprofitable routes, as the market can no longer provide the service without greater state involvement.
The association points out that the provision of public transport services in the regional route network is carried out in accordance with long-term contracts concluded as a result of public procurement procedures, based on the economic assumptions at the time of conclusion, including forecasted energy resource prices.
According to the association, the sharp and objectively unpredictable rise in fuel prices qualifies as an external factor, independent of the carriers, that significantly affects the economic balance of the contract. In accordance with public procurement regulations and principles of good governance, the customer is obliged to ensure the possibility of contract execution, including revising the remuneration mechanisms in situations where the cost structure changes significantly.
As previously reported, the Road Transport Administration (RTA) has prepared a legal solution for changing the indexing of long-term contracts for regional public transport services — to once a year. The decision is sent for evaluation to the Procurement Supervision Bureau (IUB).
The administration previously explained that currently most of the concluded contracts provide for service price indexing every four years; however, the situation after the contracts were concluded, influenced by three consecutive global crises, could not have been foreseen. The RTA notes that the market has not returned to its previous state, and the inflexibility of the current mechanism does not allow for an adequate response to sharp fluctuations in costs.
The Public Transport Council previously decided to increase the amount of advance payments to regional carriers. In accordance with this decision, an additional advance payment of 1.5 million euros was paid in March.
The goal of the decision is to help regional public transport carriers ensure positive cash flow due to rising fuel prices caused by the unstable situation in the Middle East.
