No More High Tea – The Fall of the Flag Carriers and the Rise of Budget Airlines

Anna-Cara Keim looks at the state of air travel in Northern Europe

I begun to write this piece on the plane from London to Washington D.C., travelling for the first time in quite a while with what some people would call a ‘real’ airline. With friendly staff, a generous luggage allowance, and hot meals and drinks served on board, this experience came close to what most airline passengers might have expected to be the norm 30 years ago. However, these days things are very different, and, just like so many European travellers, I tend to give up those comforts in return for a much lower airfare.

An average European spends much more time travelling than previous generations – and most of it is not for holidays. Either we work or study far away from our families or we have jobs that require us to be increasingly flexible. Long hours are spent waiting on airports, something I know only too well from my various involuntary overnight stays at Helsinki airport. Not to speak of technical problems, lost luggage or the infamous Eyjafjallajökull ash cloud in 2010.

Unlike 30 years ago, many of these journeys are made on board of low cost airlines, rather than the once proudly named ‘flag carriers’. Long gone are the times when the latter were considered true symbols of the countries they represented. And that truly meant something – the white cross painted on a red field painted on a Swissair jet parked on a Thai airfield was synonymous in the eyes of the observers with Switzerland. These days seem to have now passed for good. When the Swiss flag carrier went bust in 2002, it foreshadowed the similar fate of various other European airlines – one of the most recent examples being the former Hungarian state-owned airline Malev that went bust in February 2012. Scandinavian Airlines nearly ceased to operate in November 2012 after unsuccessful negotiations with trade unions – but last minute financial help by the Danish, Norwegian and the Swedish governments saved the airline from bankruptcy. However, this came at the price of a loss of 6000 jobs and severe restructuring.

Helsinki Airport - © Crossing the Baltic

Helsinki Airport – © Crossing the Baltic

This scenario is not untypical in Northern Europe’s airspace. The fall of the flag carriers is accompanied by the rise of low cost airlines such as easyJet, Ryanair, Wizz Air or the fast growing Norwegian, officially known as Norwegian Air Shuttle.

Even on this miserable backdrop, the fate of the flag carriers in the Baltic Sea Region looks bleak indeed. The state-owned airlines in the post-Soviet states fare particularly badly. Estonia’s national airline Estonian Air is tiny and extremely inefficient. Mainly state-owned and with a fleet of only 10 aircraft, the former CEO of the airline Toomas Peterson advised the state to restructure Estonian Air and turn it into a budget airline. Latvia’s Air Baltic is not doing much better. Last week the airline announced a loss of 19 million Latvian Lats (27.14 million Euro), marking an improvement from the historic LVL 85 million (212.44 million Euro) loss of 2011. Air Baltic was founded in 1995 as a joint venture between Scandinavian Airlines and the Latvian state, but since 2011 Latvia’s flag carrier is wholly state-owned. Despite the recent acquisition of four new planes and a number of newly scheduled holiday destinations, it remains to be seen whether Air Baltic will get back on its feet. And Lithuania, after FlyLal went bankrupt in 2009, has no national Airline at all.

Estonian Air - source: Luftfahrt.net

Estonian Air – source: Luftfahrt.net

Looking further west the Polish flag carrier LOT remains a constant source of concern for the treasury. About 93% state-owned the airline has been unprofitable since 2007 and the almost immediate grounding of the new, much-heralded Boeing’s Dreamliners has not turned out to be exactly helpful. However, by Polish law, the state is required to keep a majority stake in the airline which makes it an extremely unattractive investment for the private sector. Recently the government has announced that it will abolish this legal barrier in an attempt to finally privatise LOT. After all, unlike most other airlines in the post-communist space, LOT can proudly look back to a tradition of 60 years.

Across the Baltic, Finland’s national airline Finnair has chosen another strategy in order cope with the rise of low cost airlines – that of collaboration. As a recent chart by the Economist shows, Finnair is one of the very few European countries where budget airlines appear to play a fairly minor role. Less then 20% of the market share is held by low cost carriers, but nevertheless – they are on the rise. However, Finnair, which holds 4.8% of Norwegian Air Shuttle, has decided to opt for co-operation with low cost airlines on less profitable routes. Could the Finnish example be the way forward for national airlines? One cannot be sure.

A LOT Boeing 767 at Poznan Airport - source: wikipedia.pl

A LOT Boeing 767 at Poznan Airport – source: wikipedia.pl

Nonetheless, it seems certain that if flag carriers want to survive in the current economic climate they have a lot of work ahead of them. Aside from the – by now heavily politicised – question of ‘do we need a national airline?’, other issues have arisen as well. New high-speed rail links and a general improvement of non-aviation transport infrastructure can, and should, become just as important. Earlier this week I flew from London to Prague in order to attend a conference and various meetings that were to take place in Southern Czech Republic, Vienna and Southern Germany. Rather than choosing a connecting flight I opted for buses and trains instead. This decision proved to be good value for money: Austrian trains were fast and comfortable, offering free wifi and buses in the Czech Republic provide onboard entertainment, free drinks and wifi – thus, giving customers an alternative mode of travel that is fast and used by business people and students alike.

So why should states mourn the loss of a national airline? Perhaps it is time to invest in other transport infrastructure instead. And as for crossing the Baltic Sea, it only takes two hours on a ferry from Tallinn to Helsinki – why fly instead?

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