COO Interview: Running Two of Estonia’s Airlines in Tandem

DALLASAirways has returned to the Baltic region, specifically in Estonia, a country with a complicated history regarding airlines. However, the present situation is distinct, full of energy, and fresh.

Estonian Air (OV) was the flag carrier from 1991 and followed a traditional business model, flying from Tallinn to the major European city pairs. The airline however was not financially successful and met its demise in 2015.

Soon after, “The Nordic Aviation Group” was brought into existence, a state-owned entity aimed at getting a new airline for the country up and running as soon as possible.

So, under the group, “Nordica” was born and followed much of its former’s business, only with new management, headed by Jan ‘Palle’ Palmér along with a streamlined fleet. Palmer then took things further and set up an ACMI provider, “Regional Jet” with a mission to provide capacity for major airlines with a fleet of ATRs, and CRJs.

Photo: Nordica/ Xfly

Deeper Dive Into the Nordic Aviation Group


Today, the Nordic Aviation Group, fully state-owned, is the front-runner in the airline business in the country.  Now to connect the dots, Xfly (formerly Regional Jet) is
owned by Nordica which in turn is owned by The Nordic Aviation Group.

To add some complexity, both Xfly and Nordica have separate AOCs. Regional Jet was rebranded as Xfly in 2020. Xfly (EE) provides long-term ACMI capacity to partners who seek long-term commitments. Their key partnership is with SAS.  They operate a fleet of eight ATR 72-600 and nine CRJ-900s.

“We provide an airline with all their back end, it’s a new kind of business model we’ve developed here. So, we’re doing their flight dispatch, crew control, crew planning and training, finance, HR as well” – Guy Farnfield

Nordica (ND) however is much smaller than Xfly and until recent times flew just one CR900*, even so, the carrier is still considered the national airline of Estonia.
But things are changing, and Nordica is now growing and venturing into the larger aircraft market with Airbus A320.

Our first A320 is down with Cyprus Airways in Larnaca.”

Photo: Nordica/ Xfly

Interview with Guy Farnfield


Airways’ Siddharth Ganesh sits down with Guy Farnfield who is the COO of both, Xfly and Nordica, to understand what it’s like to run two different airlines under the same
holding group with two different AOCs – complex indeed.

“We will take three new A320s all bound for the new start-up airline Marabu. That gives us four Airbus 320 aircraft for now,” says Farnfield. “In the next 5 years, we grow our fleet to 50 aircraft between both Xfly and Nordica. 25 on the regional side and 25 A320-based aircraft, and it doesn’t discount the fact we may consider the Boeing 737 as well. It’s a complex relationship between our two airlines and I act as the COO for both companies”

SG: A rather complicated relationship between two airlines with separate AOCs under the same umbrella. How do you move forward to streamline Operations?

GF: It’s definitely challenging. We are working with the Estonian Aviation Authority (Transpordiamet) to allow us to move to one set of approved manuals that covers both AOCs.

Ideally, with single nominated people for both AOCs. They’ve been in separate existence now for 6 years and we have conducted our gap analysis to show the difference between the two operations. This will allow us to clearly see where the gaps exist between the two operations.

Photo: Nordica/ Xfly

And why not consolidate into just one?

Good question, I knew you’d get there, we as Xfly have a different mission, and with Nordica another. If we were to consolidate, our long-term commitments to a specific
airline/customer would be jeopardized.

For Example, with Xfly we work very closely with SAS, but upon consolidating, our one entity could also provide service to another airline that could be a competitor to SAS.

Also, Xfly is purely ACMI. Nordica however, has its own ticketing system and remains active in the GDS scope with Amadeus. It’s an evil complexity to live with but we will optimize it.

Talking about Xfly, the airline underwent a rebranding and saw its visibility improve significantly. Was it just aggressive marketing?

I think it’s a combination of both (rebranding and marketing). Three years ago, it went through a serious rebranding process, prior to that it used to be called Regional Jet. Then Xfly came about. The angle was – what is the “X” factor and what makes us different? It’s a catchy logo.

We have been successful in branding it. There are not many players in the European market doing what we’re doing (long-term ACMI in the regional jet market).

Larger European Carriers already have their regional subsidiary airline, what’s your take there?

Yes Indeed, be it KLM with Cityhopper, Air France with HOP, or Lufthansa with Cityline. But the fact is, they haven’t got accustomed that a regional provider like us can beat them in price.

So Xfly isn’t just another ACMI. Comment?

Indeed. We’re not just an ACMI like most others. We are looking for long-term partnerships and commitments with major airlines. We wish to have our aircraft branded their airline and not be a white tail sitting on the apron just to fill temporary capacity. This is our differentiation, Long term capacity provider.

So four Airbus A320s to Join Nordica soon? Are they all leased?

That’s correct, three for Marabu and one for Cyprus Airways, and yes, all leased.

The Marabu deal. Comment? Are you optimistic about them?

They’ve started operations and the first aircraft (ES- MBU) has been flying for 3-4 weeks now. The next three will join in the coming months. We have a 3-year deal with Marabu.

We were meant to take in six A320s from IndiGo but they decided to give us only four at the end so we had to rework our plans. You can expect Marabu to have 12-14 airplanes by the end of its third year of operation.

Yes, I am optimistic, they will succeed. They have a very strong leadership team.

Note: this interview was conducted some weeks ago, changes might have taken place.

Coming back to Xfly, there was a lot of interest in the Embraer -what happened there?

We were looking at providing our partner with a better replacement and we suggested the Embraer’s to them and eventually got ready to sign them. But things didn’t go to plan as the airline took the aircraft we were going to take instead.

We did have some Embraer prior to covid that flew for LOT Polish Airlines but we let them go after a while. We however reconsidered the Embraer some months ago but then realized from a business perspective, the lease rates of an A320 were as competitive as an Embraer, and there’s clearly a bigger pond to fish for with an A320. For now, we are focusing on the three types in our joint fleet.

Do you have any other potential customers in the pipeline?

We’re talking to a lot of them, be it EasyJet or Tui. The long-term ACMI model is going to become more prevalent. Airlines will gradually not want to get their own airplanes instead get someone else to fly for them.

And what about Outside Europe?

We do not have much outside. But we are looking at gaining FAA and Canadian approval to operate in and out of the States and/or Canada.

The famous question is, what challenges do you see ahead of you?

The supply chain issues should stay here for another year or so. Getting skilled and qualified professionals. The big threat is maintenance – OEM provision of base maintenance. Those who run this really control the industry.

Concluding thoughts from Guy Farnfield:

“It’s all about relationships, the people. You should really see how we work with SAS, how closely we work be it ordinary operations control to flight safety, IT solutions, security, etc.. we are basically an extension of them.”

“We want to continue to build on our business with TAP with more than just a couple of ATR aircraft. Maybe we can even do long-term A320 for them, it’s all about building the relationship.”

“We have to work really hard with TAP to make sure we deliver.”


Featured image: Nordica

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Article source: https://airwaysmag.com/running-two-of-estonias-airlines/

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