Nordica Story – World’S First Virtual Airline “National Carrier” Why and Does It Make Sense?
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Wings of the Future Nordica story – world’s first virtual airline “national carrier” Why and does it make sense? Sven Kukemelk Executive Director Business Development 01.11.2017 Nordica – Diversified Commercial Aviation Services Company Nordic Aviation Group (brandname „Nordica“) was founded by the decision of the Government Nordica Historical Timeline of the Republic of Estonia on September 25, 2015 in order to provide Estonia with flight 15’ October: Company established by connections 2015 Republic of Estonia (100% owned) Nordica also aims to exports aviation services to third 15’ November: Commenced parties taking no commercial risk commercial services in Tallinn and Örebro (ORB-CPH) in commercial Owners: Republic of Estonia (100%) partnership with Adria Airways Commercial fleet: utilizes 5 aircraft on its own 16’ October: Added a Groningen network and 1 aircraft on outsourced network airport as a commercial client (GRQ- through LOT + 1 under JV with LOT 2016 CPH) 6 aircraft operated by RJ 16’ November: Announced a long- term commercial partnership with LOT 1 aircraft operated by BMI 16’ December: Reached 400k Statistics (2017B): passenger milestone in Tallinn Airport ~470k passengers in Tallinn 17’ February: Finalized the sale of a ~10k managed flights 2017 stake in RJ to LOT 16 direct destinations in S’17 17’ November: Expected to launch a 2 service customers: ORB, GRQ new subsidiary, Nordic Aviation Advisory, a consultancy unit of NAG Nordica – Innovating Regional Aviation Virtual airline model for the commercial platform focused on sales and marketing Production outsourced to Nordica’s affiliate - production unit Regional Jet Aircraft leased on operational basis with a mix of short-term (2-3 years) and long-term basis (10+ years) Commercial platform outsourced to strategic partner (LOT) on cost-sharing basis Ability to focus on sales support, revenue and business management Joint production platform to reach significant cost synergies and scale (RJ) Profitable and viable business model familiar from US market – capacity providing Ability to realize synergies together with strategic partners (LOT) Targeting other potential partners to extend the platform further (e.g. Austrian Airlines, SAS etc.) All activities without significant scale outsourced Services such as maintenance, ground handling, catering etc. outsourced due to higher unit costs Continuous review on outsourcing/insourcing mix to find cost efficiencies when they emerge As an commercial unit only and a virtual airline, all revenue and related costs (including ACMI services or RJ) are settled through LOT, the legal carrier of passengers Ownership and Contractual Relationship Structure Commercial Agreement LOT Polish Nordica Airlines 6xCRJ900 Majority 100% ownership 6xCRJ900 Republic of ACMI Republic of Estonia Poland 51% 49% TVH Regional Local Lessors Aircraft Jet Crew Crewing (AOC) Companies ACMI ACMI Services-based relationships Other Other SAS Clients Clients Ownership-based relationships Nordica - 2017 Growth Reflecting Successful Launch of the Platform Number of passengers Passenger share at Tallinn Airport 70 000 30% 60 000 25% 50 000 20% 40 000 15% 30 000 10% 20 000 10 000 5% 0 0% 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 2016 2017 2017 2016 ______________________________ Note: Includes TLL-WAW statistics from June, 2017 onwards. Regional Jet – Common Capacity Provider Platform Regional Jet (RJ) was created as a stand-alone operating unit providing ACMI services taking RJ Historical Timeline no commercial, leasing or exchange rate risk RJ aims to be the most cost-efficient provider in 15’ December: Company established as a the regional aircraft market within the European 2015 subsidiary of Nordica (100%) region 16’ February: Receipt of the AOC, start of Owners: Nordica (51%), LOT (49%) the commercial AMCI operations with CR7 16’ October: Operated aircraft increased to Fleet: expected to operate and manage 16 six aircraft in total (4x CR9s, 2x CR7s) aircraft in total by YE 2017 2016 16’ November: Announcement of sale of 6 aircraft operated on Nordica network (w/ WAW) 49% stake to LOT Polish Airlines by Nordica 4 aircraft operated on LOT network 17’ February: Sale of 49% stake to LOT 4 aircraft operated on SAS network 17’ March: Addition of 2 aircraft, bringing 1 aircraft managed on wetlease basis total to 8 AC (4x CR9s, 2x CR7s) 1 spare unit 17’ March: Receipt of IOSA Customers: SAS, Nordica and LOT 17’ March: Successful bid for SAS ATR RFP 2017 Operated AC types: CR9, CR7 and ATR72-600 17’ May-June: Addition of two aircraft to the AOC, bringing total to ten AC (6x CR9s, 2x CR7s) 17’ August: Start of SAS ACMI contract Nordica - Product Export and Measured Commercial Growth Driving Upside Nordica focuses on increasing service export to third parties with Increased Export Four New Destinations in 2017 direct contracts and through RJ 2016 Full-sevice contracts with different partners at regional airports (e.g. 8% ORB-CPH, GRQ-CPH) including both 16% commercial and operational services ACMI-only projectes targeted atRJ beyond LOT / Nordica / SAS 76% Nordica’s own commercial footprint growth progress gradual with focus on business segment mainly 2017 (thinner routes with full-year 16% capacity needs) In S’17 added also Sankt- Petersburg, first bilateral destination 56% 28% Summer network supporting core route network Nordica Export of Services Other Export .