Estonian Air to Introduce Revised Network Strategy

Following increasing losses, the Supervisory Council of Estonian Air has acted quickly to bring a further change in strategy at the Baltic flag carrier by replacing existing Chief Executive Officer, Tero Taskila, with industry veteran, Jan Palmér, from immediate effect and dropping its current focus on generating transfer traffic to instead concentrate on core point-to-point markets.  The members of the board of also presented their own resignation request to the Minister of Economic Affairs and Communications.

Since the Estonian State acquired majority of the carrier in autumn 2010 the main drive of the company’s ambition to return to profitability has been to increase connection opportunities via Tallinn Airport.  This has resulted in notable network realignment during 2011 and 2012 as the carrier has brought more destinations online to boost transfer options via the Estonian capital.

“By the middle of this year, it was clear that the chosen strategy of Estonian Air had risks, realisation of which worsened the company’s financial performance considerably,” said Erkki Raasuke, the Chairman of Estonian Air Supervisory Council.  In fact the carrier has reported a loss of €20.2 million for the first nine months with a third quarter loss of €5.3 million being recently announced.  Although revenues are up 19.9% in this period (versus 2011) losses have almost doubled from €11.2 million for the first nine months of 2011.

“Based on the financial results and future prospects, the Supervisory Council decided to change the strategy approved last year and to name Jan Palmér as the new CEO of the company,” said Erkki Raasuke.  “Changed direction is based on core route network for Estonia, where there is a solid fundamental demand.”

Jan Palmér is well respected in the commercial aviation business and has over 20 years experience.  He was most recently President and Chief Executive Officer at Cimber Sterling Group having previously been in charge of Amapola Flyg, Skyways Holding and Malmö Aviation and remains a board member of the European Regions Airline Association (ERA).  “I use my experience from several regional airlines to support the change of direction requested by the Supervisory Council,” said Jan Palmér.

He will start in his new position on November 1, 2012 and his initial goals are, according to Estonian Air, to ensure smooth service for the customers, to adjust the route network based on real economic demand, and to reduce company’s costs in proportion of the new business volumes.  A new medium-term plan is expected to be presented to the Minister of Economic Affairs and Communications by the end of November.

It is understood that previously announced plans by Estonian Air to launch flights to Gothenburg and London City will now been cancelled, while seasonal routes to Riga and Tbilisi will not be resumed.  A number of other current routes are likely to be closed with suggestions that only six of its flights are currently financially sustainable.

In the first nine months of this year Estonian Air carried a total of 688,000 passengers, with numbers in the third quarter reaching 264,000.  Across the nine month period the airline’s load factor was 71.5 per cent, with a particularly good performance in the third quarter of 74.8 per cent.

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