The much-discussed airline fee increase at Tallinn Airport was introduced to cover a €2.7 million loss in the aviation sector last year, said the company's board chair Riivo Tuvike. Tuvike told ERR, that if the airport were to keep fees at the same level, the money would have to be found from elsewhere to cover the losses.
While according to unaudited figures, Tallinn Airport group as a whole made a profit of €8.7 million last year, almost half of this was brought in by subsidiary Tallinn Airport GH. Tallinn Airport's own profit for last year was around €5 million. However, the group's overall profit would have been more than €10 million had it not been for a €2.66 million loss in the aviation sector, Tuvike said.
The aviation sector at Tallinn Airport has been operating at a loss for the past three years, with the decline beginning during the coronavirus pandemic. According to Tuvike, the company cannot afford for this trend to continue, hence the decision to increase airport fees.
"We have been in the red in aviation for the last three years, and before that we were only breaking even. We don't want to maximize profits in aviation because we want airlines to come to us. But we can't operate at a loss either. And the question then arises, of whether Magnetic MRO, which rents hangars, should have to cover the losses. Maybe (it should be) the passengers, who drink coffee and consume things, or perhaps, we would we have to significantly lower the quality of service. And when we looked at the airport charges, we saw that it should be those that are used to cover the losses so, that we would break even," said Tuvike.
"We saw, that even if we raised the charges to the point where we were breaking even for aviation, we would still be one of the cheapest (airports) in the region. Our neighbors are looking at doing the same. Vilnius Airport has also increased airport charges by 28 percent," he added.
The decision to raise airport fees however, has met with a cool response. Last Wednesday for instance, Ryanair announced it would be discontinuing seven of its flight routes from Tallinn. The budget airline also said it was contesting the increase in charges with the Estonian Competition Authority.
In addition to its aviation sector, Tallinn Airport's business also includes the rental of commercial real estate (hangar and logistics centers), as well as revenue earned from commercial rentals and sales at the passenger terminal, parking fees and taxi services. The subsidiary Tallinn Airport GH operates the airport and provides aircraft handling services.
Next generation canning machines to be installed this year.
According to Tuvike, for Tallinn Airport to be able to continue making investments, it must also make a profit. Over the next three years, investment in the airport will amount to €110 million. Part of this expenditure will be used for the replacement of the airport's current hand luggage scanning machines, with next generation models that mean passengers will no longer have to remove liquids and electronics from their bags.
While they are set to be installed within the year, the new machines do not come cheap, with the total cost of a new system likely to be as high as €5 million.
"We completed the procurement last year, and thought (at that time that) we would only replace a few machines, not all of them. The tender was too expensive, with the price of one machine coming to €1 million. We are hoping that for the next procurement (the price) per machine will be lower. We are talking something in the region of €4-5 million. Exactly how much, I don't know because we haven't run the tender yet," said Tuvike.
The new security equipment is set to be installed at Tallinn Airport later this year.
"We will be able to (install) it during the low season, which is in the fall, and it will probably be rolled out in the first quarter of 2024," said Tuvike.
Editor: Michael Cole