Taskila: where are Estonia and Europe flying to?

17.09.2012, 14:06

Estonian Air CEO Tero Taskila writes in Äripäev that whether we like it or not, Estonia is too tiny to maintain a network of flight connections that is only based on domestic demand.

Taskila writes that the global competitiveness report made by the World Economic Forum ranked Estonia 34th among 144 countries. In terms of the size of domestic economy, Estonia was 103rd.

In the category of air transport that measures how well the air destinations and frequencies serve local businessmen, Estonia has actually climbed one spot to 73rd that is a good achievement considering our size.

Civil aviation seems to be one of the most affected economic sectors in recent years. To name but a few problems: expensive fuel, ash clouds, bankruptcies, mergers, etc.

Passengers are welcoming the fact that airfare increased only 1.4% between 2005 and 2010. At the same time, fuel cost for airlines has gone up by more than 40% during the same period. Because of the EUR/USD exchange rate changes, European airlines are now forced to pay 60% more for fuel than they did in 2005.

At the time when many European airlines have seen their profits plummet and been forced to downsize their network of connections, especially for shorter so-called regional routes to secondary destinations in Europe such as Tallinn.

At the same time airports are fiercely competing for attracting new routes. Considering the conditions, Tallinn Airport has done an excellent job in bringing airlines to Tallinn and tourism income for the state budget.

Fact remains that Estonia is too small to develop its air connections only based on domestic demand. One sign of this is the fact that for the winter timetable, airlines have been recently reducing their route network in Tallinn.

While budget airlines are likely to close a route as soon as it becomes unprofitable, national carriers do not have this luxury. National carriers need stable demand and often compensate loss-making routes with more lucrative main destinations.

This means that since Estonia’s domestic demand is limited, Estonian Air needs to create additional demand from abroad. Last summer, for instance, we created it successfully in the Helsinki and Tbilisi direction. Our efforts were somewhat less successful in the Hannover and Kajaani direction. We also believe that we will restore our routes to Tbilisi in the spring and will re-open the London route as well, with much better frequencies than until now.

The decision to change our airfare policy from October was partly triggered for the need to keep an eye on our costs. It’s only understandable that the passengers who were affected by such changes feel disappointed.

I hope, however, that the customers see the need for such a step. We are determined to offer the best direct connections from Tallinn to Europe’s main centres. To do so we need to attract to Tallinn transit passengers from Finland, rest of Scandinavia, Russia and Lithuania. Only this allows us to become profitable.