Estonian Air posts profit despite industry woes

  • 2002-04-11
  • Kairi Kurm

Last year will be remembered by the airline industry as one of the worst ever, except in Estonia.

Dozens of airlines teetered on the edge of bankruptcy as people decided to stay home in the aftermath of Sept. 11. Losses to the airline industry are estimated at $17.5 billion.

But Estonian Air, the country's national carrier, turned a small profit, the first since the company's founding in 1991.

Estonian Air posted a profit of 15 million kroons ($882,000) on sales of 800 million kroons in 2001. An increased number of passengers, lower fuel prices and the kroons strengthened exchange rate against the U.S. dollar helped nudge the airline into the black, according to Erki Urva, the airline's vice president.

Urva said the company's profitability has been the result of a long restructuring process to essentially invent an airline after the Soviet Union fell.

This year's profit, he added, shows the process is beginning to bear fruit.

"Since the establishment of Estonian Air a lot of work had to be done to reorganize and restructure the heritage received from the former Aeroflot," said Urva. "We had to bring the activities in accordance with the European standards, find new Western-type aircraft and create new commercial structures as well as an international sales network."

In 1999 Estonian Air suffered a 56 million kroon loss. Last year the loss was trimmed to 10 million kroons.

Urva said he also expects a profit for 2002, although first quarter results show a 7.5 percent decline in the number of passengers. He expects the numbers to improve this summer and exceed last year's passenger figures.

Despite a drop in air traffic after Sept. 11, the number of passengers on Estonian Air's scheduled flights increased 2 percent last year to 272,500.

The airlines' load factor - it's capacity versus number of actual passengers - was 52.5 percent, compared to 49.5 percent in 2000. That enabled it to make a profit, Urva said, but was still not satisfactory. On European scheduled flights an average load factor is 50 percent to 70 percent.

Lithuania's national airlines will not remember 2001 with any particular fondness.

The state-owned national carrier in Lithuania, Lietuvos Avialinijos, posted an unaudited loss of about 25 million litas ($6.25 million) last year.

Lithuania's government is in the process of choosing a strategic investor to buy a 49 percent to 51 percent stake in the financially beleaguered Lietuvos Avialinijos, the oldest Baltic carrier and the only fully state-owned airline left in the three countries.

Lietuvos Avialinijos' Kaunas-based subsidiary Lietuva also suffered ballooning losses last year, which may spell the end of the commuter carrier.

Lietuva lost 4.96 million litas last year, up considerably over the 1.48 million litas loss posted in 2000. The country's State Property Fund and the airline's foreign auditors have voiced doubts about the subsidiary's viability.

Latvia's national airline, airBaltic, carried 248,710 passengers in 2001, a 14 percent increase compared with 2000.

But that trend hasn't continued so far this year. The airline had 32,662 passengers in the first two months of this year, a 3 percent decline compared to the same period last year.

Most of Estonian Air's revenue – 88 percent – comes from scheduled passenger traffic, while 5 percent is attributed to charter flights and 3 percent to mail and cargo transportation. The remaining 4 percent of the company's revenues last year were earned from the sale of ground handling and maintenance services at Tallinn Airport.

Currently Estonian Air operates two Boeing 737-500 and two Fokker 50 aircraft and makes 66 weekly flights from Tallinn to nine international destinations, including Copenhagen, Frankfurt, Hamburg, London, Kiev, Moscow, Riga, Stockholm and Vilnius.

The company is partly owned by Denmark's Maersk Air (49 percent), the Estonian government (34 percent) and the investment bank Cresco Investeerimisgrupp (17 percent). The state is considering selling its remaining share.