Low Cost & Regional

Connecting the Nordics: How the Finnish aviation market is booming

Finnish aviation market

Satu Dahl explores recent developments in the Finnish aviation market and learns just how vital strategic partnerships are to local airlines.

The Finnish aviation market is booming when it comes to both domestic and international air traffic, according to Finavia, a company that operates Finland’s national airport network. 2018 was exceptionally busy for its airports which served nearly 25 million passengers.

Compared to 2017, passenger volumes in Finnish airports grew by 10.1 per cent, and Helsinki Airport reached 20 million passengers for the first time in the airport’s history.

This is certainly impressive growth, and Finavia says its aim is to grow air traffic in the region even further: “We have again broken records at Helsinki Airport as well as our regional airports. We are doing the best we can to ensure the responsible and sustainable growth of air traffic,” said Joni Sundelin, executive director of Helsinki Airport and Finavia’s senior vice president in charge of Airline sales and accounts.

Finnish outlook

The number of airlines looking for their share of the market is also growing in the region. The recent news of Danish Air Transport (DAT) acquiring 60 per cent of Norra’s (Nordic Regional Airlines) shares is an interesting development, and according to Finavia, several other airlines increased their flight frequency and improved their connections in the region in 2018.

The number of routes available through Finavia’s regional airports increased last year, with SAS launching a direct connection between Tampere Airport in southern Finland and Malaga, and between northern Finnish city Oulu and Sweden’s capital Stockholm.

Low cost carriers Wizz Air and easyJet also contributed to the increase of regional routes, with Wizz Air beginning operations from Turku to Kaunas, while easyJet launched a route between Rovaniemi and London Gatwick. Rovaniemi and other destinations in northern Finland are becoming increasingly popular with especially British travellers wishing to see the Northern Lights and experience the region’s winter season.

Gatwick Airport said in November that it had seen a surge in passengers travelling to Lapland and that in October 2018, the number of passengers heading to Rovaniemi from Gatwick had almost tripled year-on-year.

Regarding domestic traffic, northern Finland is again seeing significant growth – passenger volumes to Finavia’s airports in the area grew by nearly 9 per cent year-on-year, representing a significant jump. Popular winter holiday destinations Ivalo and Kuusamo saw impressive growth, with passenger volumes for Ivalo growing by 15.1 per cent, while Kuusamo Airport saw a mammoth 29.4 per cent increase, Finavia said.

Finnish aviation market: DAT
DAT has solid experience in operating regional traffic with ATRs

The company noted it is investing €55 million in its airports in Lapland, with Rovaniemi, Kittilä and Ivalo airports being significantly expanded and, in response to the rapid increase in passenger numbers, more services are also being introduced. Looking at scheduled international flights, total passenger volume in Finland grew by 10.8 per cent.

European destinations for scheduled flights remain popular, with Sweden, Germany, Spain and the United Kingdom in most demand, Finavia says. In addition, Russian traffic was up by nearly 120,000 passengers year-on-year, representing an impressive increase of around 30 per cent. The long-haul destinations with the largest passenger volumes were Japan, China, Thailand and the US.

According to Finavia, a third of the departing passengers at Helsinki Airport were transfer passengers. “Helsinki Airport is a vital hub of air traffic in Northern Europe, especially for Asian passengers. This is reflected in the continued growth of the number of transfer passengers. As expected, we reached a major milestone by hitting the 20 million passenger mark, and we actually got very close to 21 million,” Joni Sundelin said.

Strategic regional partnerships

When it comes to local airlines, Finnish regional airline Norra has certainly had an eventful year with significant developments taking place in recent months. In August, it was announced that Danish Air Transport (DAT), a well-established Danish airline, had acquired 60 per cent of Norra’s shares from Finnair.

Finnair stated at the time of the acquisition announcement, that the transaction would not have an impact on Norra’s operations, personnel, or the purchase agreement between Finnair and Norra. Norra operates flights for Finnair to both domestic and international destinations and according to Finnair, all Norra-operated flights have a Finnair flight number and the flights’ policies and services are the same as on Finnair-operated flights.

Finnair remains the owner of 40 per cent of Norra’s shares. The flag carrier, which in January carried 1,007,800 passengers, 4.4 per cent more than in the corresponding period of 2018, originally established Norra with Flybe Group in 2011 under the name Flybe Nordic.

Finnair began operating the business in Norra’s name in 2015 and became a temporary sole owner of the airline in November 2017 when previous shareholders withdrew from the company.

Finnair said the current deal benefits all parties: “Finnair and Norra’s partnership model in domestic and regional purchase traffic has served us well, and Danish Air Transport will strengthen the partnership even more. They have solid experience in operating regional traffic with an ATR-fleet”, stated Jaakko Schildt, Finnair’s chief operating officer.

Finnish aviation market: Norra
Visuri – We are looking for opportunities to grow

The acquisition was approved by the Finnish Competition and Consumer Authority in September 2018. The authority concluded that the acquisition did not significantly prevent effective competition in the Finnish aviation market.

The routes served by Danish Air Transport did not overlap with those of Finnair and Norra, and the parties to the transaction were not competitors in any market segment, the authority said.

Strengthening operational strategy

Annually, Norra operates over 50,000 flights for Finnair within Finland’s domestic and international route network. Last year, it carried around three million passengers. Norra’s fleet consists of 12 ATR 72-500s and 12 Embraer 190s, and the airline says it is currently refurbishing the cabins of its ATR fleet, with the refurbishment planned for completion in 2020.

Discussing the opportunities DAT’s ownership of Norra will bring to the airline, Maunu Visuri, Norra’s managing director, comments: “First of all, DAT will bring a significant amount of experience from the regional aviation sector to our board. We have also commenced several studies focusing on potential synergies between the companies and of new opportunities.”

Visuri explains that it is still too early to share more details about these opportunities while confirming that the airline’s ATR fleet will remain Norra-branded, and its Embraer aircraft will continue to be Finnair-branded, just as they currently are.

Commenting on any potential changes to the airline’s fleet, Visuri says: “Our backbone is the Finnair production, and currently we do not expect changes in the medium term. Going forward, we do constantly look for opportunities to grow”.

According to Visuri, Norra’s busiest routes within Finland are to regional cities Kuopio, Turku, Joensuu and Vaasa. Within Europe, international hub cities Tallinn, Stockholm, Riga and Vilnius see the most demand. Visuri says there are plans for new routes for the airline in the near future, as Norra will begin operating Finnair’s new routes to Bologna and Hannover in the summer.

Creating opportunities

Jesper Rungholm, DAT’s president and CEO, sees many strategic technical and operational opportunities in its acquisition of Norra. “The possibilities this acquisition creates are almost unlimited.

Both airlines already operate the same aircraft, and together we can strengthen our technical and operational skills in areas such as ACMI [Aircraft Crew Maintenance Insurance]. We are also looking into growing our maintenance operations, so there are many areas where we can benefit from this strategic partnership”, Rungholm notes.

Finnish aviation market: Norra
Rungholm sees unlimited opportunities in the acquisition of Norra

DAT, also the main shareholder of DOT LT, a Lithuanian airline established in 2003, operates regular regional routes, both in Denmark and Norway, to several destinations that include Copenhagen, Billund, Aalborg and Stavanger, and also flies between Oslo and Stord through Stordflyet.no, DAT’s Norwegian operation. DAT also performs ad hoc flights on behalf of companies and private individuals in need of specific and individual solutions.

Having established DAT with a single aircraft in 1989, Rungholm is a pioneer of regional aviation in Europe. The airline started out by transporting a wide variety of goods, which could be anything from mail and parcels to racehorses, and now transports up to one million passengers each year.

DAT has its main hub in Vamdrup, Denmark, and its current fleet consists of ATR 72 and 42 aircraft, McDonnell Douglas MD 82/83s aircraft and Airbus A320/A321 aircraft. Last year, DAT received a delivery of two ATR 72-600s from commercial passenger aircraft leasing company Avation PLC, and Rungholm says the airline has so far been very happy with them.

Troublesome regulation

Speaking about the latest developments for DAT, Rungholm explains that the airline has had a successful year: “Our regional scheduled services have really grown in the last year, and are performing very well. Regarding new routes, we’ve recently announced a new seasonal summer route between Billund, in central Denmark, and Stord, on the western coast of Norway. Our ACMI operations are doing very well too,” he states – DAT has extensive experience in operating ACMI flights.

However, when it comes to charter operations, the airline has recently run into issues with the European EU261 passenger rights regulation.

Rungholm is disappointed in the way the issue is being handled by politicians: “We have recently stopped our charter flights due to potential costs incurring from the EU261 passenger rights regulation,” he said.

“The risk scenario with EU261 costs is potentially catastrophic, and this has resulted in us stopping charter operations – the reward just doesn’t match the risk. I find the fact that this is what forced us to discontinue this service and the lack of response from politicians regarding this flawed regulation really disappointing.”

IATA’s director general and CEO Alexandre de Juniac echoed his thoughts at the recent CAPA Aeropolitical and Regulatory Affairs Summit, noting that the regulation is confusing and poorly-worded, which adds costs to the European industry while not doing its best to protect consumers.

“Even the European Commission sees the shortcomings of this regulation and has proposed important reforms. But these have been held hostage for years as a result of the implications of the Gibraltar dispute between the UK and Spain”, he remarked.

He said ‘Smarter Regulation’, a concept IATA has been promoting for several years, results from dialogue between the industry and governments focused on solving real problems, and that discussions should be guided by global standards, and informed by rigorous cost-benefit analysis.

Visit flynorra.com for more information.

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