There was an article in the Estonian business daily Äripäev
today about all the changes to their flight schedule. The article is for subscribers only and only in Estonian, but I can list the changes here:
- TLL-MAN route cancelled from July 1
- TLL-DUB route cancelled from September 4
- TLL-HAM route temporarily cancelled from September 4 (no information on when it wil resume)
- TLL-BGY route Monday's flights cancelled from June 5
- TLL-SVO route Tuesday's flights cancelled from July 4
- TLL-OSL route Saturday's flights cancelled from July 8
- TLL-BCN route Sunday's flights cancelled from July 9
- TLL-FRA route Tuesday's and Thursday's flights cancelled from July 3, Wednesday's flights cancelled from September 6
- TLL-BRU route Wednesday's flights cancelled from June 14 - August 16
For a class project, I did an extensive study of Estonian Air's corporate performance. I benchmarked them against firms of varying sizes and models, and also looked at game theory in terms of competition and pricing, since they generally have at most one direct competitor on any given route. Earlier in this thread it was mentioned that LED
are alternative airports, but I don't think there is much competition. LED
requires a Russian visa (as was mentioned), which is costly and takes time, and it also requires traveling at least 7 hours by bus/car. RIX
doesn't have the visa issue, but it's also a trip of 5-6 hours. In many cases, even if OV
is costly, it will not be as costly as the hassle and traveling expenses of using an alternative airport.
is the real competition for TLL
, as there is much more competition from that airport and prices are adjusted accordingly. This is especially true when going to more far-off destinations. In my experience, if you know in advance your travel dates, then flying on OV
to one of their destinations is reasonably OK
price-wise. If you are traveling somewhere they don't fly (necessitating a transfer), then you're better off getting out of TLL
on one ticket (to HEL
or even to LON or FRA
), then buying a separate ticket from there. For example, when I had a business trip earlier this year to SIN
, it was 4x cheaper to book TLL
tickets on OV
, then book a separate itinerary for the other parts of the trip (LHR
in this case).
My financial benchmark analysis (which only used FY2004 data because their FY2005 Annual Report had not been released yet) showed that they are not skillfully capturing the customer's willingness to pay. They are charging too little for advance-purchase tickets, and as a result their planes are full of too many low-paying customers, who would be willing to pay 10-25% more for their tickets (OV actually underprices EasyJet in these situations). I think the cancellation of the DUB
routes are for this reason -- I do remember reading in a local newspaper a few weeks ago that they indicated the profits were not there on these routes.
is interesting -- I think they are not competing well in the Italian market, so that most of the Italian tourists are arriving via holiday charters. They should do more to court the package operators. It may also be an issue that the timing of this flight (same for DUB
) is quite inconvenient -- it's overnight.
, and BRU
cancellations are probably due to lack of capacity -- they have not been able to add a sixth aircraft to the fleet as was planned when this schedule was originally drawn up.
is interesting. I was able to get access to pax traffic data out of TLL
and analyzed the effect of LH
's entry into the market in 2004. The LH
entry ended up increasing the traffic on this route, and LH
didn't really "steal" any traffic from OV
. I think LH
was bringing in pax from far-away destinations connecting through FRA
. At the time LH
had only a 1x daily flight that was in the evening, which made it impossible to fly to the US through FRA
for example, since all US-bound flights leave FRA
in the morning. OV
was getting the outgoing morning traffic to FRA
in these situations. However, about 2 months ago LH
finally wised up and added a morning flight too. This makes connecting through FRA
both ways quite easy, and I think that has caused OV
to scale back this route. As an aside, when KL
entered the TLL
route, they pummeled OV
pulled out of the route a few months after KL
entered. The reason (in my opinion) is OV
had no agreements in place at AMS
so they could not pick up any transfer pax through AMS
, only O&D.
is primarily a tourist destination (both ways) and I suppose the charter companies are beating them there. Just from walking around the streets of Tallinn and listening to what languages people are speaking, I can say that TLL
has grown in popularity as a destination amongst Spaniards.
The temporary cancellation of a BRU
flight is not surprising since most people in Europe take their holidays around this time, and the BRU
route is mostly to shuttle people back and forth from the EU.
Something else that everyone might find interesting: prior to 2004 OV
had more pax traffic through TLL
than all other airlines combined. Starting around November 2004, this changed, and now all the other airliens (combined) have a much larger share of pax than OV
does. 2004 was the year Estonia entered the EU, and it looks like OV
could not handle the increased competition well.
I heard from an Estonian aviation industry insider that OV
is considered the ignored airline by SK
, and all the focus is on BT
. Based on BT
's expansion recently, I do agree with this. I think in the next few years, we'll see OV
become part of BT
, and TLL
traffic will consist primarily of feeder flights to RIX
and VNO, and direct flights to key high-demand markets like LON, CPH
, STO but definitely not to places like SIP and DBV
, which are 2 destinations OV
currently flies to.
could improve by changing the aircraft mix. All aircraft in the fleet are some variation of the B737 (B735 and B733 to be exact). The problem is the break-even point on such a plane. You need to fill X seats (assuming the pricing model stays the same) to break even. On a smaller plane, the number of seats to reach break-even is lower, and this is key in a small market like TLL
(just an example) may not have been profitable on a B737, but might be on a smaller plane as you need to fill a fewer number of seats -- a number which might map more closely to demand.
I have also noticed that OV
occasionally operates charter flights during the day -- those valuable times should be used instead for scheduled service, whose passengers are usually willing to pay more.