Toomas Peterson: Xfly – why and who for?

Regional Jet, a subsidiary of Nordic Aviation Group that mostly operates aircraft and crews for other airlines, has chosen Xfly as its new brand name. The new moniker creates various association, such as anonymity, lack of distinguishing character and even a mysterious TV series, Toomas Peterson writes.

The fact the company chose a name that emphasizes anonymity is hardly surprising. The recent trend that has seen the de facto successor of our national airline Nordic Aviation Group (NAG) mostly operate on other European markets through its subsidiary Regional Jet (RJ), overlooking departures from Tallinn, only supports this latest decision.

And even though it is just the brand name of a company that operates shorter flights for major European airlines that will not be appearing in sales systems or as aircraft logos, the name should have somehow reflected Estonia, if only to use it for flights out of Tallinn or emphasize the continuity of Estonian civil aviation or even develop it.

Growth of global civil aviation started slowing last year. Data from the International Air Transport Association (IATA) suggest that global air transport grew by 4.1-4.2 percent last year depending on the indicator. Growth was 7.1-7.2 percent as recently as in 2018.

Passenger figures grew by a measly 3.2 percent in Europe that sees about one-quarter of the world's flights, down from 6.1 percent in 2018. If we add to this the potential effect of the coronavirus in Q1 2020, we see that there is hardly cause for optimism for a small airline.

Europe, with its aging population, inner conflicts, import dependency and recently also new climate policy that will hike costs, could be overtaken by countries growing faster – USA and China. Air transport is directly tied to GDP and grows more or less in step with the latter.

In this context of European economic and aviation outlook, the strategy of Regional Jet, owned by LOT and the Estonian state through NAG, is growing its fleet to 50 aircraft. Economies of scale are a fact of nature, with lower cost price of a single seat and competitive ticket prices making all the difference.

Regional Jet's aircraft will rather be rounding up passengers for major European airlines in the future. While decisions by our all-knowing and irresponsible officials and politicians have seen the taxpayer invest nearly €200 million in Estonian Air and Nordica. We could ask for something in return, like daily direct flights from Tallinn to key European destinations, flying out in the morning and returning in the evening for example. Not to mention flights to Tartu.

Of course, they might prove unprofitable, depending mainly on the price of fuel, competition situation and the loyalty of our tiny market, but would still broaden the horizons of more than one local player and attract more than a few investors.

Therefore, if we want to fly from and to this European periphery, money Nordic Aviation Group makes in Europe should be used to pay for flights out of Tallinn. In a wise and balanced manner, of course. For example, through Regional Jet paying its parent dividends the latter would use to launch a few competitive lines out of Tallinn under the Nordica trademark. This would boost competition in the Tallinn hub and possibly lower the price of tickets to some extent.

The situation in global aviation has changed radically. There is no more room for small so-called national airlines. Instead, we see constant consolidation to form conglomerates of major airlines and smaller players concentrating primarily on rounding up passengers for the bigger fish.

Therefore, we need to seriously consider whether the Estonian state needs a stake in an airline. Perhaps it would be more practical to make room for private capital that is freer and faster in its decisions.


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Editor: Marcus Turovski

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