Parts: first-half results of Estonian Air were well below expectations

09.08.2012, 14:38

In an interview to Eesti Päevaleht, minister of economic affairs Juhan Parts says that the national airline did not meet its business targets set for the first half of 2012, but said that he cannot disclose the actual loss. (Eesti Päevaleht has information that the airline’s first-half loss was between 10m and 11m euros. Later today the airline announced that it lost 15 million euros in the first half - editor).

Q: How satisfied are you with the new strategy launched in March with a focus on transit passengers?
The state has told Estonian Air to improve connections and bring the company out of the loss. There are now better connections than there were two or three years ago.
The worrying sign is that while connections have improved, financial results are clearly below expectations.

Q: How much did Estonian Air lose in the first half?
The company will disclose the figure. I hope that it will happen in the next couple of days. Generally, the airline has disclosed its results once a year. I think it would be reasonable to make it at least twice a year or after every quarter.

Q: Are you happy with the work done by chairman Tero Taskila after one year?
My expectations and the expectations of the whole nation are higher. Today the company’s results are depending not only on its management, but on how the company manages to grow its capacity.

Q: What is your opinion of the decision to terminate the London route?
Estonian Air is already flying to major capitals in Europe and should also fly to London. Executives of several companies have told me that they are not happy to fly to London twice a week, but this has been a problem almost throughout the entire history of Estonian Air. With regard to the decision such as the termination of the London route, we need to come up with a management system where the shareholder could interfere. The state has given Estonian Air managers two goals: to ensure as many connections as possible and to earn money.

Q: Will we see Frankfurt as one of the destinations soon?
In the Frankfurt route you have a competitive situation since there are many other European airlines such as Lufthansa that are providing the service.

Q: In your opinion, which option serves the nation better: focus on transit passengers or ensuring regular and frequent connections in Europe?
In Iceland, for instance, there are many connections and the state does not support the national airline, so it’s possible. Then, Lithuania showed that the failure of a local airline could bring about a major setback. Vilnius Airport was empty for a very long time. We need such a number of connections and flights that allows to maintain economic and cultural ties. Air connections need to support achieving economic success. The more the destinations the better.

Q: How is the state responding to the dismay of businessmen about the termination of the London route?
We cannot tell Estonian Air where it should fly. (…)The state cannot simply demand that Estonian Air flies to London. Of course, there are other airlines on the market that are flying from Tallinn to London, but the question is whether the quality that they offer is satisfying the people.

Q: How much capital is the state going to inject into Estonian Air this year?
The company should manage this year with the funds that have already been allocated.

Q: Should the state invest taxpayer’s money in the national airline?
Of course not, especially if you consider the subsidies that the state pays to the operators of public transport. At present you can fly from Tallinn to more than 30 destinations although we have only a little over a million residents.

Q: People seem to be willing to support the national airline and see it flourish
Yes, this is the basis for our work. When we decided to take over the airline that at that time was basically bankrupt, it was because we did not see any other airline that would have taken over the connections abroad. We understood that the risk of a possible failure was too high and decided to invest in the airline money that did not belong to Parts, Ansip or Ligi, but to the taxpayer. Now we want the company to stand up on its two feet and become sustainable.
The supervisory board of Estonian Air expects the airline to be economically stronger in two years’ time. The company’s chairman has been hired to reach certain results. We demand these results and do not plan to endlessly concede nor keep injecting large amounts in the business.
We are not accepting the position that as soon as the results get worse the government will be injecting more capital in the company. We want to see changes and we want to see a clear perspective.

Q: So you are not ruling out a new capital injection?
I never rule out anything. We are living at a time where we cannot rule out even a new capital injection into Greece.
Until now we have been supporting Estonian Air on the consideration that if we leave the market to decide air connections, it could start restricting Estonia’s economic and social development and we don’t want to be in that situation.
Estonian Air is still looking for its strategy and the way to reach its objectives. The company’s executives and employees need to be able to restructure the company in a way that it becomes more sustainable.

Q: Tero Taskila has said that the state is putting a lot of pressure on his work
Of course. Which work is not under pressure? This is natural

Q: How are half-empty flights to small Finnish towns sustainable?
Taskila’s strategy is to expand the home market, ie Baltic countries and Finland that is close and has high purchasing power. Estonian Air is taking certain risks b offering flights to smaller locations. The key is that Taskila is responsible for the consequences.