Nordica not yet profitable, but on the way up, says CEO
Nordica will publish its annual report in spring, after selling a stake in its subsidiary Regional Jet to Polish national carrier LOT. Until then, the company would continue to publish monthly results, its CEO, Jaan Tamm, told ERR on Wednesday.
Nordica has been in operation since autumn 2015, and since then has transported more than 400,000 passengers. While it first partnered up with Slovenian carrier Adria Airways, it switched partners in late 2016 and is now working with LOT.
Partnership with LOT so far a success
According to Tamm, the change was worth it. Business costs had gone down, changing to LOT’s sales platform had been a success, and Estonians could now easily travel through LOT’s hub at Warsaw Frederic Chopin airport, which meant access to intercontinental flight connections as well, he explained.
Nordica is still operating at a loss. According to Tamm, they expect it to eventually come in at about the projected €15 million. Though the company is happy to say that they served 365,179 passengers in 2016, it does not presently want to talk about its load factor, which Tamm argued made little sense as the company was still in the process of consolidating its fleet.
Nordica reports its market share to have been 18% in 2016, going for 21% in January of the new year, and even 25% with LOT’s flights included. According to Tamm, more people are ready to fly with Nordica.
Nordica's reputation improving quickly
In terms of its reputation, Nordica has recently been very successful. The airline’s communication has become more conservative, while its service record has improved markedly, and its brand gained a solid foothold in the Estonian market. The advantages of LOT’s sales platform directly translate into passenger comfort, for instance with online check-in now available for all destinations.
2016 brought a few surprises as well. As Tamm told ERR’s Merilin Pärli, the seasonal flights to Munich and Odessa in the summer were a success, the Odessa route was popular enough for Nordica to announce an additional flight for the coming summer season.
Setbacks included the announced but never operated connection to Edinburgh in Scotland. Tamm said that they had seen that it wouldn’t be popular with Estonians, so they had abandoned the plan. For their flights to Paris, the season had ended a month earlier last summer, as the destination had become less attractive recently.
Tamm also said that considering their original business goals, they were doing very well, even better than the performance he had predicted when introducing Nordica’s business model to parliament. By now, the airline was running its own operational platform as well.
Nordica has a fleet of currently six aircraft, and is looking at leasing two more.
Load factor needed to see where Nordica stands
Beyond passenger and flight numbers, where Nordica stands in terms of its business overall will become clear once it publishes its annual report. How it is doing operationally and in comparison with the rest of Europe’s airline industry will become clear once it publishes its load factor.
The load factor indicates the share of total seats per passenger kilometer an airline manages to sell. The International Air Transport Association (IATA) calculates break-even and maximum load factors for each of its global regions, which then indicate the average percentage airlines in a particular region likely have to reach in order to operate profitably.
In 2016, which IATA describes as a good year for the industry, as of November the average load factor stood at 80.5% worldwide, and at 82.6% in Europe. Break-even load factors, i.e. the point at which operations become profitable, declined sharply in 2016, coming in at just over 60%.
Editor: Editor: Dario Cavegn