Nordica sees €5.4 million loss despite turnover, passenger and flight rises
While reported revenue at flag carrier airline Nordica increased by 30 percent year-on-year (y-o-y) to 2018, to a total of €107.7 million, with a similar increase in passenger numbers, the state-owned operator still saw a net loss of €5.4 million, according to a company press release.
The parent company, Nordic Aviation Group, saw unconsolidated losses of nearly €5 million in its 2018 financial result (as distinct from the consolidated figure noted above), including additional price agreements for the airline services provided by its subsidiary, Regional Jet, for 2018. Nordica/Regional Jet concluded a framework for the renewal of cooperation with LOT Polish operator last week.
According to Nordica management board member Kristi Ojakäär, "a new balance has been found between the partners, enabling us to develop the company together," with reference to the agreement with LOT to invest in Regional Jet.
Nordica recently announce the cancellation of five more of its routes in autumn, as reported on ERR News. The routes to Kiev, Copenhagen, Trondheim, Vienna, and Vilnius are no longer profitable, the company said.
Nordica/Regional Jet has however won the tender for a contract to operate a domestic air route in Sweden for a period of four years, valued at a little over €16 million.
Nordica enjoyed a 33 percent increase in passengers y-o-y to 2018, to 765,000. At the same time, flight numbers increased by 38 percent, reaching nearly 16,000 in all markets. Through 2018, around two million people flew with Nordica both via Tallinn and on foreign markets, the copmany said.
According to Ojakäär, the growth of air traffic and the high number of passengers did not translate into positive economic results.
"The consolidated financial results of the Nordic Aviation Group fell to a loss of €5.4 million," he said.
"This financial performance was primarily influenced by the continuing loss on the Tallinn network and the costs of changes in air traffic, including fixed costs for aircraft," he continued.
LOT cooperation aims
The Lot deal is aimed at stemming the profitability problems, according to Ojakäär.
"Nordica has a clear goal of increasing profitability. The changes made in the line's network at the beginning of this year have already had a positive effect on this year's financial results, and from autumn we will focus only on profitable activities, stop flying unprofitable routes, and focus on increasing the volume of foreign flights through the subsidiary, Regional Jet", she said.
Ojakäär added that the provision of air services to major airlines, such as SAS and LOT, was successful in 2018 and has high growth potential in the years ahead.
"The Regional Jet customer base is growing, and we believe that this business is a long-term perspective," she noted.
In order to support Regional Jet business volumes in 2018, Nordica's fleet was boosted by the addition of three aircraft, with more planned over the coming years. Aircraft added in 2018 started to implement international agreements of subsidiary Regional Jet, mainly concerning the largest Scandinavian airline, SAS.
Founded in 2015, and effectively replacing the now-defunct Estonian Air, Nordica cooperates with LOT), with a 51 percent stake via its Regional Jet subsidiary to LOT's 49 percent. Other partners in Europe include Air Serbia, Flybe and various contract partners in Europe. Regional Jet operates 19 aircraft and employes over 500 aviation specialists in Estonia and abroad, the company says.
Veteran media executive Gunnar Kobin was recently appointed the company's next CEO, starting on Sept. 1 and replacing Jaan Tamm. Tamm had previously said that one of the main issues facing Estonia's airlines have been frequent strategy shifts.
In May, the Ministry of Economic Affairs and Communications said it planned to deliberate the transfer of the state's holding in Nordica.
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Editor: Andrew Whyte