Threats to the future on short-haul routes

By Jyri Raivio
     
      Competition on Finnish domestic air routes comes from two carriers, the SAS subsidiary Blue1 and the private regional airline Finncomm, based in Seinäjoki.
      Blue1 has eight and Finncomm 13 domestic destinations. For Finncomm, domestic flights provide practically the entire source of revenue - the airline also flies to Stuttgart and Tallinn.
      According to the Finncomm CEO Juhani Pakari, the company is making a profit on its operations.
      The company’s strategy is based on increasing demand by keeping prices low. There would apparently be some room for reducing prices, since Finncomm is able to produce its flights appreciably more cheaply than Finnair.
     
Reading from the statistics, the cost to the consumer of domestic flights has increased at almost twice the pace of international flights over the past fifteen years.
      The biggest threat to Finncomm's profitability is the payments required by Finavia.
      "Finavia’s charges are an absurd burden on us. They have been going up all the time and they are nowadays 67% greater than our fuel bills", says Pakari.
      He believes the state should step in to help ease the pressure. One good means in his view would be to do away with Finavia’s revenue obligations to the state. Last year Finavia had to come up with EUR 10 million. Director-General Harri Cavén from the Ministry of Transport and Communications dismisses this sort of talk as "wishful thinking" on Pakari's behalf.
     
In Pakari’s horror scenario, the shorter domestic routes will come to a sticky end if the charges go up any more.
      In this context, "shorter" means those routes falling south of a line through Vaasa, Seinäjoki, Kuopio and Joensuu.
      If they were to be shut down, Finavia’s boss Samuli Haapasalo would have to put up the shutters on quite a few more airports.
      According to the Blue1 Managing Director Stefan Wentjärvi, there are serious threats hanging over all destinations that are less than three and a half hours by train from Helsinki, with the exception of the big cities of Turku and Tampere.
     
Blue1 is actually considering increasing its flights, particularly to northern destinations in the high season. Domestic services are "running at a slight loss", above all owing to competition.
      If one company were to enjoy a monopoly - as Finnair once enjoyed across the entire country - then for instance the Helsinki-Jyväskylä route would be, in Wentjärvi’s words, "a real gold-mine".
     
Helsingin Sanomat / First published in print 14.10.2007

More on this subject:
 Blue and white wings leaving the home market

Links:
  Finncomm
  Blue1
  Finnair
  Finavia
  Ministry of Transport and Communications
  Finncomm Airlines (Wikipedia)
  Blue1 (Wikipedia)
  Finnair (Wikipedia)