Estonian Air swaps managers, debates strategy

  • 2005-01-12
  • By TBT staff
TALLINN - Estonian Air executives have decided to fire CEO Erki Urva and begin a search for a new CEO after the company's financial results for last year failed to meet their expectations.

"Despite the presumably profitable year, the supervisory board's expectations have been higher, and taking into account the considerably increased competitive pressure in [the market], board members have regarded a management renewal as necessary," the company stated in a Jan. 5 news release. The board thanked the outgoing chairman and commended him for working in particularly challenging conditions.

The move comes at a time of wholesale changes in the airline industry brought on by the arrival of discount carriers, tax breaks and record numbers of tourists.

Urva was quoted as saying that he himself had come to believe that it would be good for Estonian Air if a new management team brought new ideas and views to the company.

Olev Schults, chairman of the supervisory board, stressed that there was no one particular reason for the decision to part with Urva. "I certainly believe Estonian Air was active enough in its offensive marketing approach, and I do not think there is much difference nowadays between low-cost and traditional carriers. You have to make money whatever way you can," he told The Baltic Times. "Labeling it low-cost versus traditional is a bit primitive."

The arrival of young, discount airlines - Ryanair and easyJet - in the region had virtually nothing to do with Urva's departure, he said, adding that those two carriers' arrival on the Baltic market was a natural process.

When asked about Estonian Air's profitability, he was more cautious. "There are many angles to this. An airline is just another business, and it has to be successful. Certainly competition has grown, but there are other things. It is clear that the expectations of the supervisory board were higher, also in terms of profitability."

According to unaudited information, Estonian Air earned a small profit in 2004, though it appears to have been less than in 2003. What's more, the company apparently is at loggerheads as to which direction it should take: that of the national carriers or of budget airlines. Schults on Jan. 5 briefed the Economic Affairs and Communications Ministry on the situation, and Andrus Ansip told the Eesti Paevaleht daily that he would like to see Estonian Air continuing as a classical carrier and providing the same list of direct flights as it does now.

"I think Estonian Air is one of the best airlines I have ever used," the minister told the paper.

As regards to the search, Schults explained that the company was holding a tender in Estonia and that it was welcoming CVs from Estonians living abroad and "looking for a challenge" back home.

While the board is busy searching, Borge Thornbech, who served as chief executive in 1996-2000 after the airline was privatized, will fill in the position.

Estonian Air is 49 percent owned by Scandinavia's SAS, with the government holding 34 percent and AS Cresco 17 percent.