As part of Routes Reconnected we speak to Riivo Tuvike, chairman of Tallinn Airport (TLL), who outlines the airport’s rebuild strategy and how the industry must adapt after the pandemic crisis.
What’s the current situation at TLL?
We have been hit by COVID- 19 in the same way as the whole aviation industry. Maybe even harder as Estonia took a more conservative approach compared to many other European countries. Due to implemented flight bans our passenger numbers didn’t recover during the third quarter as much as in other regions in Europe.
Estonia is actually one of the few countries in Europe with such restrictive flight bans. For example, Istanbul is a very important destination for Estonia, but at the moment the government is not allowing flights to Istanbul.
We implemented very hard and fast cost-cutting in the second quarter. We downsized our staff and cut operating costs about 25%, investments by 50% and today, when looking back, then we probably reacted adequately as the current crisis has turned out to be more severe than we anticipated in May.
How have your airline partners reacted to these challenges?
Naturally, understanding the airline's situation, needs and possibilities keeps us in close contact and talks. We think that having regular close contact with airlines is the only way to move forward together in this situation.
But of course, as expected the discussion topics with airlines are different from what they have been in normal circumstances as there is a strong focus on government restrictions and how to rebuild traffic and stimulate the demand.
No airlines have said they would stop flying from Tallinn. Some are very concerned about these travel restrictions but we are very glad that our airline customers are ready to restart operation as soon as possible. And this is not just in one airline segment, but overall from both legacy and low-cost operators.
What is the usual demand driver at TLL?
We have business relationships with the rest of Europe and Estonians usually use airplanes; railway connections are not very good. But it’s also holiday destinations, we have quite bad weather so people want to travel in Europe. We have some VFR, but leisure and business are the main drivers.
Unfortunately leisure travel is really down at the moment. There is currently one destination, Cyprus, where Ryanair is flying. The flight is not full but the load factors are maybe 60%. Other than that, it’s business travelers.
So which key routes/networks are the most important to rebuild?
The main focus is on restoring our core business and hub routes to increase the connectivity. We already have a number of significant routes back in our schedules, but the aim is to gradually restore the frequencies, provided that the demand will allow that.
Greece and Croatia are two destinations that Estonians love but there are currently no flights scheduled for summer 2021. Network planners in airlines, this is your opportunity! Technologically savvy Estonians, who have created 5 unicorns for the world, are waiting for you.
So how do you hope to rebuild demand once restrictions are lifted?
The introduction of vaccines and removal of travel restrictions in the long run, and in the short run introducing common pan-European fast and cheap testing procedures which replace quarantines.
Some people are really scared of catching COVID-19 on airplanes, but I think the majority of people are more scared about getting stuck somewhere in a foreign country; they can't get back or they need to be in quarantine. The price of the ticket is not the issue and people are ready to fly 5-10 hrs. or more to whatever destination.
The rules are so complicated and this is what people are afraid of, and this is the challenge. To overcome that, first of all, they need to replace these quarantines with the proper testing, and this is what the airlines and also airports are driving.
My personal belief is that this is the big failure of the European Commission or the European Union; they haven't managed to agree common rules and common use of testing in Europe. But I know that this is moving in the right direction so I hope that there will be some good news about that soon.
The solution is antigen tests; reliability is getting better and is already reasonably reliable to take into wider use. It is in governments’ hands now and hopefully we will soon hear some good news.
The economic downturn may have effect on passenger numbers in the short run but in the longer perspective, traveling will not disappear and we still want to explore other countries and experience cultural differences that the world has to offer. We all have a small Columbus or Marco Polo inside ourselves and COVID-19 will not change it.
Have you offered any additional incentives/support to airlines?
Like the airlines, also the airports are under massive financial pressure at moment. In Tallinn, landing and passenger fees makes up only 1/5 of our total revenues and it is because our landing and passenger fees are one of the cheapest among European capitals.
I'm actually an ex-banker and when I came to Tallinn Airport I was actually a bit surprised at how cheap we are! Our incentive package is very attractive, and so are the landing and licence fees, so I would say the cost base we are asking from the airlines is actually rather good.
Michael O’Leary said in ACI 30th Europe Annual Congress that airports have been tough (he actually used another word) on airlines for years with their fees. Maybe this is true in some big capitals in Europe but not in Tallinn. We are selling Rolls Royce with price of Opel. We are a city centre airport, passenger ASQ is always among the top in Europe, ground handling punctuality is 99%.
But regardless of what I just said, we have approached the Estonian Government for additional support for airlines, but we believe also that currently demand cannot be supported with low prices because almost nobody is traveling due to travel restrictions. Removal of travel restrictions, replacing quarantines with testing, is our top priority.
Does the industry need to change in response to the crisis?
At the moment that is COVID-19, but maybe after two or three years there will be something else and we need to be ready for that. The worst thing would be not learning from this crisis now, so we definitely need to create procedures to combat future pandemics.
Firstly, we need to invest in systems that make the journey more efficient and seamless for the customers, something that makes the cooperation smoother between airports and airlines.
After 9/11 we started to screen liquids and bags and now we need to create new procedures, which are maybe costly for airports and also airlines, but keeps our industry operating in the long-term perspective.
How has the wider stakeholder group (city, tourism board) supported TLL?
The tourism sector in Estonia has been more united then ever in this crisis. We have weekly meetings with VisitEstonia and all tourism industry organisations. We work united with all the proposals to the Estonian Government. Tourism used to be 8% of Estonian GDP and that´s a big industry. We have excellent SPA and nature tourism products in Estonia and of course Tallinn’s UNESCO-listed old town.
The winter will be very hard for tourism industry, but we work together to keep the key expertise in the sector and to come back next year!
Photo credit: Tallinn Airport