Estonia’s flag carrier forced to change its business model

Strong competition has driven Nordica to move from being a scheduled carrier to an air services provider (Nordica)

State-owned Estonian flag carrier Nordica is to see its operating model completely altered by the move from being a scheduled carrier to a direct air services provider from the start of the upcoming IATA winter season from late October.

The airline is giving up on its own commercial schedules blaming strong competition and the oversupply of seats on routes to and from the Estonian capital of Tallinn.

Instead, Nordica will focus on its third-party exports, which continue to grow. By abandoning its unprofitable routes, the airline will be offering its aircraft and crew in providing profitable sub-contracted third-party services. It currently exports such wet-lease services to carriers in Sweden, Denmark and Poland.

At the same time, Nordica and its partner LOT Polish Airlines, have signed a renewed cooperation agreement under which LOT takes over the management of ticket sales and customer service whilst Nordica operates the flights only, a statement from both companies says.

As a result of the reorganisation, another five unprofitable Nordica routes will be suspended from the end of October. Flights will continue from airline’s base Tallinn airport to Stockholm, Brussels and Warsaw, which will be serviced by LOT from the 1st July though.

“Nordica has a duty to ensure the airline’s profitability and sustainability – this is what the ownership [Estonian government] expects of us. Strong competition and the oversupply of seats on Tallinn routes do not allow us to operate profitably today,” explains Kristi Ojakäär, a member of Nordica’s Management Board. “In order to maintain readiness and our ability to provide the necessary regional air connections to Estonia in the future, Nordica will continue to provide air services and LOT will deal with routes and ticket sales and will carry the commercial risk.”

Before today, Nordica had been carrying the commercial risk burden on all Tallinn routes and had simultaneously provided the air services. “In foreign markets, however, we have been performing the role of a direct air services provider for several years, leaving the commercial risk to the vendors. We will now implement this model in all markets,” Ojakäär adds.

The new arrangement will have the biggest impact on passengers who travel from Tallinn to Trondheim because, from the 26th of October, no other airline is able to serve this direct connection. From this date, all other Nordica destinations will be performed by LOT, SAS, Wizz Air, Norwegian and airBaltic, which is currently the biggest operator at Tallinn.

Founded in 2015, the Nordic Aviation Group AS (branded as Nordica) has grown to become Estonia’s largest airline. Since 2016 it has been cooperating with Regional Jet OÜ, a subsidiary of Nordica (51 per cent) and LOT (49 per cent) in the provision of air services to LOT, Nordica, SAS, Air Serbia, Flyby and various contract partners in Europe. Regional Jet OÜ operates 19 aircraft and carries some two million passengers a year, employing more than 500 aviation specialists in Estonia and abroad.