Estonian Air ja muutuv majanduskeskkond Uued väljakutsed ja võimalused Joakim Helenius, 29.09.2011
Global Trends
Income inequalitly increasing in the West Source: OECD Income Distribution and Poverty Database
More detailed look at the US
New middle class increasing rapidly in emerging markets
Air travel has proved to be resilient to external shocks
Estonian Tourism Trends
Tourist flow data
Tourist flow data
Russian Market Trends
Trends in European Tourism Source: TourMIS, ETC, UNWTO and STR Global
Estonian Air: New Strategy Highlights
Mission Connect Estonia to the world Act as a business card for Estonia Do so with a sustainable profit
Alternative strategy choices: Geographical reach options Regional Medium-haul Long-haul Business model options Full service Hybrid Low cost Equipment options Single fleet Mixed fleet
What did we keep in mind in making our choice: The state needs connections with other capitals/regions in order to make Estonia a more attractive destination for investments and highly skilled employees. The Estonian public wants frequent flights to popular destinations at reasonable prices. Estonian businesses need a reliable local airline willing to help as far as possible to service their international connection needs.
Choice: Network Strategy Short to Medium-haul full-service network strategy As a regional airline, Estonian Air would not be able to meet the expectations of Estonians to have more connections and frequent flights to Europe. The network airline model allows for an increase in the number of destinations and attracts different types of travellers. Connection passengers from smaller cities such as Jyväskylä and Trondheim enable Estonian Air to provide a good product and prices to, for example, Amsterdam and Brussels. Network airlines do not depend so much on the season this guarantees travellers all year around.
Map of Europe
Things to be taken into account Growth will come at the cost of profitability. Aviation is a long-term business. Many of the investments produce returns only after 3-5 years. Estonian Air needs long-term commitment from its shareholders.
Medium term targets Become a reputable airline in Scandinavia Fly to the major cities in Western Europe as well as to some of the popular tourist destinations To be profitable
What does the new strategy mean for Estonia s economy/tourism: Better connections increase Estonia s attractiveness in the eyes of foreign investors Significant jump in Global Competitiveness Rankings ( Quality of air transport category, 77th currently) Without good air connections Estonia will find it difficult to attract FDI and become an IT hub. WEF Global Competitiveness Report 2011-2012 Overall Quality of air transport infrastructure Quality of port infrastructure Finland 4 16 7 Ethiopia 106 49 88 Latvia 64 54 51 Azerbaijan 55 57 73 Estonia 33 77 18 Lithuania 44 109 44 Hundreds of new jobs in aviation-related fields and thousands of new jobs in business sectors indirectly benefitting such as tourism, hotels, restaurants and many more. Airport revenues would increase, allowing for significant reduction in airport fees. This could attract more airline traffic through Estonia.
Ministry Study (1) An indirect economic impact study was carried out by the Ministry of Economy and Transportation about the new strategy of Estonian Air. The key conclusions were the following: There is a clear need for an hub-and-spoke airline in Tallinn. The chosen network model is preferred, taking into account the current needs of business people and government directives. There will be significant benefits for Estonia Benefits in 2015 (per annum) Passengers, thousands 2502 Spending by foreign tourists, mln EUR 60 Value added tax, mln EUR 8 Other benefits (taxes, etc.), mln EUR 18 Value added through indirect benefits, mln EUR 30 Total, mln EUR 116
Ministry Study (2) Additional benefits identified, but not quantified: Significant jump in the Global Competitiveness Ranking Quality of Air Transport Infrastructure sub-ranking (approximately 20-40 places) More than 2000 jobs would be created 800 related to aviation Airport revenues would increase by 22M Euro (double that of 2010 revenues) This would allow for a 20% reduction in airport fees Number of transit passengers would increase Impact to employement at the airport not considered Transit passengers would increase non-aeronautical revenues. These revenues could in turn allow for a reduction in airport fees
We can look at the world either as a glass-half-full or half-empty