The Skift Airline Innovation Report is our weekly newsletter on the business of airline innovation. We look closely at the technological, financial, and design trends at airlines and airports.

Brian Sumers writes and curates the newsletter, and we send it on Wednesdays. You can find previous issues of the newsletter here.

More than six years ago, Air Baltic, a small government-owned Latvian airline, brought in Boeing and Airbus for a spirited competition between two next-generation aircraft — the Boeing 737 Max 7 and Airbus A319neo.

Just before Air Baltic was set to choose Airbus, a Bombardier sales team popped in. “We have something,” one person told Air Baltic CEO Martin Gauss, and it wasn’t the regional jets Bombardier usually pitched small European airlines.

“We said, ‘no, no, no,’ we are going for real airplanes,” Gauss told me last month. “They came and said, ‘We have a real airplane coming.’ We opened the process again. They pitched. They showed the aircraft. They gave the price. They gave the performance guarantee. And based on that package, we had to take a decision.”

Air Baltic committed to an airplane — then called the Bombardier CS300, and now the Airbus A220 — few other airlines wanted, and it almost certainly got a great deal. Now, it has a dozen, all with 145 seats, with firm orders for 38 more, plus 30 options.

I spent some time with Gauss last month in London and found him honest and engaging. He seems to enjoy leading one of Europe’s airline success stories, but he is realistic about Air Baltic’s future. Small airlines can’t leverage advantages of scale, and Gauss knows Air Baltic might be attractive to a major European airline company or private equity firm. Whatever entity acquires the airline will be probably thrilled to have a fleet of efficient and comfortable narrow-body jets.

If you read my story about Air Baltic, let me know what you think via Twitter or email.

— Brian Sumers, Senior Aviation Business Editor [bss@skift.com, @briansumers]

Best on Skift

Air Baltic Looks to JetBlue Founder David Neeleman for Guidance: Air Baltic treats its customers better than Ryanair and Wizz Air treat theirs. This is mostly out of necessity: Air Baltic has higher costs, and it can only make a profit if commands a revenue premium. But Air Baltic’s CEO, Martin Gauss, told me he believes in David Neeleman’s strategy of treating customers well. “If you are not making the customers happy, sooner or later you’re not going to be successful,” Gauss said.

American Makes It Harder for Agents to Rebook Coach Passengers on the Competition: Maybe airline re-accommodation agreements are relics of the past, but as a frequent flyer, I love them. If I’m flying on a U.S. legacy carrier and my flight is delayed or canceled, I’ll often ask the airline to put me on a competitor. The answer is almost always yes, and I get home or to my meeting a lot sooner than I would otherwise. American will still take care of its best customers under its new policy, but average coach passengers are going to have a much harder time persuading an agent to rebook them on Delta or United.

American Airlines Feels Vindicated in Its Second Try at Direct Distribution: Skift distribution guru Sean O’Neill, who doubles as the travel tech editor, explains in great detail how American’s distribution strategy has evolved in the past eight years. As O’Neill says: “American Airlines has moved away from its earlier belligerence to navigate a cooperative path with distribution middlemen.”

Skift Call Oct. 12: The Next Big Challenges for Low-Cost Airlines: Skift acquired Airline Weekly last month, and now we’re putting its managing partner, Seth Kaplan, to work. Seth and I will play host to a free conference call Friday in which we’ll discuss some of the challenges faced by low-cost airlines. We all know about the success stories, such as Ryanair, EasyJet, and Air Asia, but not every discounter fares so well. This link explains more about what we plan to discuss.

Airline Passengers Want Digital Solutions to Common Travel Problems: Flyers want convenience, and many are willing to trade their personal information for a more seamless air travel experience. That’s according to a new survey of travelers from IATA, the global trade group. Andrew Sheivachman, who covers business travel for Skift, explains the significance of IATA’s findings in this story.

Hopper Raises $100 Million More for Airfare and Hotel Rate Prediction: Hopper last week announced it has raised even more money, saying it would use the funding to expand internationally. O’Neill reports, “The startup is also now overpriced, based on its funding, for most potential acquirers — except maybe for Airbnb.” Read the full story for his take on the company’s future.

Best of the Rest

How Premium Economy Turbocharges Profit for Airlines: U.S. and European airlines love premium economy. Why? Because it’s highly profitable! The seats take up a little more room than the average coach seat, and yet airlines often sell them (on average, at least) for about 1.7 times the economy class fare. As Airline Weekly’s Kaplan put it in this Bloomberg story by Justin Bachman, “Anytime you can get paid double for something that doesn’t cost you double to produce, that’s a pretty good place to be for any company.”

As JetBlue Joins Race to Air-Travel Bottom, What’s Needed Is a Netflix of the Skies: Los Angeles Times columnist David Lazarus argues against unbundling, saying what passengers prefer is an all-in experience like what they get from Netflix. It’s an interesting analogy, but I’m not sure it holds. Passengers have shown repeatedly that they just want the cheapest price. Many don’t seem to have interest in paying for a premium product.

A Step-by-Step Guide to Launching a New Route: This is an in-house story produced by Hawaiian Airlines, so take that for what it’s worth. But Brent Overbeek, Hawaiian’s senior vice president for revenue management and network planning, explains in impressive detail why the airline is launching Boston-Honolulu, the longest U.S. domestic flight. The airline spent three years calculating the economics of it. “After years of research, out of all the markets in the East Coast (i.e. Washington D.C., Baltimore, Atlanta, Toronto), Boston checked all our boxes,” he writes.

United Airlines and the ‘Bethel Effect’:  Early next year, United Airlines will begin flying from Los Angeles to Redding, California. It is not an obvious route for United. Why is it flying it? According to the local newspaper in Redding, Bethel Church offered a revenue guarantee of $450,000. Apparently, it makes sense, as this is a megachurch, and it and its acolytes spend mega money on travel. “In 2016, Bethel staff, people attending church-hosted conferences, and students of the School of Supernatural Ministry logged more than 5.5 million air miles,” the newspaper reported.

Contact Me

Skift Senior Aviation Business Editor Brian Sumers [bss@skift.com] curates the Skift Airline Innovation Report. Skift emails the newsletter every Wednesday. Have a story idea? Or a juicy news tip? Want to share a memo? Send him an email or tweet him.

Photo Credit: Air Baltic was close to going with the Airbus A319neo before Bombardier made it a sweet deal for what was then the CS300. Now it's called the Airbus A220-300 — the aircraft pictured here — and it's been a game-changer for the airline's fleet. Air Baltic