Nordica hopes to weather crisis flying for other airlines

CFO of Nordica Deepak Ahluwalia Photo: Madis Veltman

Like most airlines, Estonia’s Nordica has also taken a beating in the crisis. Passenger figures fell manyfold last year, with the company generating a loss of over €10 million. State aid in the volume of €30 million was secured to stay in the air.

Nordica CFO Deepak Ahluwalia believes Nordica can still exit the crisis a winner. He says in an interview that the airline stands ready to launch regular flights from Tallinn as soon as demand returns. Until then, the national airline will have to participate in European flights tenders.

You have lived here for over 20 years and speak fluent Estonian. How did you come here and ended up working at Nordica?

I first came to Estonia in the winter of 1995 after which our family came on holiday several more times. We decided to stay here for good in 2000. I went to seventh grade at the Tallinn 21st School when I was 12 years old. I spent my nights studying Estonian that allowed me to learn the language in six months so I could stay on top of my studies. After graduating from high school, I studied business management at the Tallinn University of Technology Tallinn College. Because I traveled a lot when I was a kid, I developed a keen interest in aviation and I got a job at Estonian Air check-in during my studies. And here I am.

You are actively participating in aviation tenders. Is that currently Nordica’s main source of income and how does it work?

Aviation tenders are definitely our number one business today. We are participating in several European tenders and will use our own aircraft and crews should we win. It is handled by Nordic Aviation Group (NAG) subsidiary Regional Jet using the Xfly trademark. It is pure export. We are currently operating flights between Stockholm and northern Sweden, for example.

Countries had few tenders at the height of the crisis, while new ones are cropping up all the time now as air travel recovers. Airlines are slow to take risks and do not want to maintain loss-making connections during the pandemic. For example, Finnair offered Helsinki flights from Joensuu, Kemi and Kokkola before the pandemic. These links were severed when Covid hit, and Finnair is still not willing to return to them.

This forces countries to restart domestic flights using underbidding and such tenders are myriad. We plan to participate in a total of 30 regular flights tenders this year and the next.

Tenders give the airline a source of income that does not depend on the number of tickers sold or occupancy. We are responsible for making sure the aircraft is serviced and crewed and flies on schedule for which local governments pay us for flight volumes and seating. It is undoubtedly a good business opportunity that is helping us weather the crisis.

Nordica only moved 22,000 passengers last year, mostly in norther Sweden. How have you done this year?

NAG catered to a lot more passengers. Those 22,000 were just a part of the group’s work – people serviced under the Nordica trademark. Looking only at Nordica, there were 60,000 annual passengers in northern Sweden before the pandemic in 2019. That figure shrank threefold last year. We are expecting to ferry 35,000-40,000 passengers this year. But it mostly hinges on the spread of the virus and vaccination progress.

We also operate charters for sports associations and delegations. Several Estonian companies organize motivational trips for their employees and partners. It is a growing trend.

You recently participated in tenders in Ireland and Finland? How did you fare and where else have you applied?

Unfortunately, we were not victorious. Demand is for the cheapest price, while I hope customers will start looking at age of aircraft, quality certificates etc. in the future. We are set to participate in tenders in Spain and Central Europe – Austria, Germany and France.

Nordica recently secured its IATA code. What is the benefit?

Our new and future-oriented project is introducing our own commercial platform that will allow us to sell tickets independently. For that purpose, we applied for an aviation business certificate and an IATA code, with Nordica designated ND.

We used Adria’s code in 2015 and worked with Polish LOT since 2016. Our first flight under our own Nordica ND code will take place in Sweden in August. The plan is to share the code with others and generate revenue that way. We would be offering the service to other, largely virtual airlines that lack their own code and for whom it makes no sense to acquire one. We have sent corresponding offers to four smaller airlines.

What are the aircraft used by NAG?

We are currently flying 16 leased aircraft nine of which are CRJ and seven ATR planes. One aircraft is currently under the Nordica trademark. The rest of our fleet is used by service export company Regional Jet that uses the Xfly trademark. We use Xfly planes and crews to service regular flights tenders that come our way.

Xfly is also operating aircraft for SAS and LOT and other airlines as necessary. Future success at tenders will see us sell tickets under the Nordica trademark and procure flights from Xfly. The latter is the largest ever Estonian aviation company in terms of number of aircraft and flights volume. Estonia Air was making use of nine aircraft in its heyday.

When will it be possible to take a Nordica flight out of Tallinn again?

We stand ready for demand returning. It usually takes up to six weeks to launch a new regular line. It would be relatively simple, at least initially, as there are enough available takeoff and landing slots at European airports, with the exception of some major hubs like Frankfurt, London Heathrow or Amsterdam.

Tallinn flights still largely depend on the pandemic, which is why we can say nothing in terms of deadlines today. The recovery in aviation compared to 2019 has been 60 percent, while that mostly concerns private passengers. People who want to go on holiday or visit acquaintances. Business travel, that has always been Nordica’s priority, has not recovered in the same volume. Looking at the destinations and time of departure from Tallinn today, we see it is not a good fit for the business traveler.

It is virtually impossible to fly to a destination and return to Tallinn in the evening presently. That said, business travel would benefit Estonia the most as decent links to European business centers would bring investors and money.

We expect business travel volumes to reach 70 percent of the 2019 level next year, while some skeptics say only a third of business travel will return in the coming years.

We stand ready to launch flights from Tallinn as soon as demand returns. We have enough capacity and flexibility to offer connections, while having our own flight school means we are no longer dependent on other airlines for anything.