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How to Bring an Airline from Loss to Success within 12 Months

11/12/2013 by Cdr. Bud Slabbaert

Jan Palmer is one of the invited panel members at CEPA EXPO.

A country straightens out its airline. Estonian Air is the country’s flag carrier based in Tallinn. The airline is 90% government owned. SAS is in with less than 10% ownership. To get the job done, the airline selected Jan Palmer, a Swedish veteran who has been in the airline business for more than 20 years. From all the media reports and interviews, one may conclude that his communication is straightforward and transparent which on its turn that may result in trust, confidence, sympathy and also national pride.

It began about a year ago when the news media report­ed: “Estonian Air fires CEO”. Baltic’s state-owned Estonian Air showed a nine-month loss of €20.2 million, nearly doubled from €11.2 million in the year-ago period. The Supervisory Board of Esto­nian Air will change the com­pany’s direction and assigns Jan Palmer as the new CEO of Estonian Air starting No­vember 1, 2012.

“Estonia has a problem, but a lot of other airlines are also having problems in this environment today. It’s a very tough business,” says Jan Palmer, the new CEO, at the inaugural press conference. “The situation in Estonia is not so dif­ferent from some of the companies that I’ve been working for. I always believe it’s possible to solve it. I have been doing this kind of turnaround in companies for many years because part of the business in aviation is that it goes up and down all the time. I honestly believe it is possible to get it down to at least a break even situ­ation.”

Palmer’s main goals are to ensure smooth service for the customers, to ad­just the route network based on real eco­nomic demand, and to reduce company’s costs in proportion of the new business volumes.

Between then and now

Half of the staff was laid off. The num­ber of flights was cut to 10 core destina­tions. The Estonian government lends €8.3 million to Estonian Air. New agree­ment with a Union will increase the work efficiency of cabin crews up to 15%, wage level retained on the 2008 level. Fleet size was cut. The four-storey office building at Tallinn Airport was sold. In July 2013, Estonian Air is back in profits. Manage­ment Board is downsized. Estonian Air operates charter flights to utilize the fleet better. Regularity and punctuality are at 99.9% and 93.2% respectively.

Now

One year after Jan Palmer took over the nine-month loss is down by 66% year on year. Revenue dropped by 21% and 38% less passengers were carried. More profit­ability, more revenue per passenger and higher efficiency. The company hopes to be profitable by the end of the year. The Es­tonian Air CEO summarizes: “Our mission of Estonian Air is to provide Estonia with reliable and regular double daily connec­tions to destinations of strategic importance and of substantial demand. ”We fly regular routes to Stockholm, Copenhagen, Amster­dam, Brussels, Oslo, Moscow, Munich, St Petersburg, Kiev, Vilnius and Trondheim. A small country on the periphery of Europe depends on such connections, and Estonian Air is committed to providing these servic­es. Serving a small home market requires to be a very cost effective and flexible airline. We now have built up an optimal network that enables us to stay competitive and en­sures sustainable core business.”