Estonian MP: Regularity of flights still problem for Nordica

Jet in Nordica livery. (Postimees/Scanpix)
9/20/2016 7:15 PM
Source: BNS
Category: Business

Progress being made by state-owned Estonian airline Nordica is altogether satisfactory, but flight cancellations and delays remain its biggest problem, said MP Toomas Kivimägi, chairman of the Riigikogu's Economic Affairs Committee, after a meeting with Nordica managers on Tuesday.

"Nordica has effectively completed the switch to a fleet of aircraft operated by themselves now," Kivimägi told BNS. "When they operate themselves, costs are up to 40 percent lower than when the service is outsourced. The load factor of aircraft has also improved significantly; it is within the target range that they had set in their business plan."

At this point, Nordica's biggest prooblem is the regularity of its flights, in which the goal is a ratio of 99 percent. "It is important for the reputation of the airline too," explained Kivimägi. "Right now it's somewhere near 96-98 percent; the value of each percentage point is in the area of one million euros [in value]."

The Reform Party MP noted that the negative net performance seen this year is absolutely consistent with the budget.

"I think we are moving in a direction that is altogether satisfactory," he said.

One-offs related to the launch of an airline made up a very big percentage of costs in addition to the costs of wet leasing and parallel activities related to the renting and training of one's own teams. "Their plan is to start making a profit on a current basis in 2019," said Kivimägi. "If they meet that target, they will have coped well with their job."

The 15 million euro loss that the airline is budgeted to sustain in its first year of operation is not impossible to fathom either, considering the fact that the state pays a subsidy of 21-22 million euros on public transport, almost 20 million euros on ferry services and a large amount of money on domestic passenger train services as well, the MP added.

Nor is the loss of 15 million euros that the airline is budgeted to sustain in its first year of operation impossible to fathom, considering that the state pays a subsidy of 21-22 million euros on public transport, almost 20 million euros on ferry services and also a big amount of money on domestic passenger train services, the MP added.

He pointed out that a larger number of direct flights and better accessibility of the Estonian capital of Tallinn brings considerably more money back to Estonia.

"While there is very intense competition in aviation, of course, and we have no reason to celebrate yet, developments are clearly in a positive direction," said Kivimägi, adding that the goal to reduce losss to 5-6 million euros next year and begin making a profit in 2019 still looked realistic.

Editor: Aili Vahtla

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