Finnair has announced an agreement with Finnish domestic carrier Finncomm which raises questions over its fledgling relationship with Flybe.
The preliminary deal, announced yesterday (September 9), includes the purchase by Finnair of a 20 per cent minority stake in Finnish Commuter Airlines (FCA) which runs Finncomm's flight operations, but also the total share stock of the companies that own Finncomm Group's 12 ATR aircraft.
Finnair had announced a "major agreement" with Flybe last month, in which the UK regional airline would provide feeder services within Scandinavia and the Baltic Seas area to begin in October. But that now looks to be in doubt with Finnair's hand having been forced by its competitors' interests in Finncomm.
Finnair's new CEO Mika Vehvilainen spoke to ABTN. When asked how plans with Flybe were progressing, Vehvilainen said he was now looking at "other opportunities" for the UK airline following the deal with Finncomm.
But Vehvilainen said there was room for both Finncomm and Flybe in its strategy, and that a dialogue with Flybe was still underway.
Senior VP corporate communications for Finnair, Christer Haglund, mirrored his CEO's comments.
"The deal with Finncomm doesn't affect things with Flybe," Haglund said. "Flybe has a lot of experience with feeder markets and we still hope to work with them in the future. We're just looking at other ways in which to do so."
Finnair's CEO Mika Vehvilainen said it was "never Finnair's intention to buy Finncomm", which already provides feeder services to the Finnish flag carrier and has done so for more than ten years.
But Vehvilainen revealed that Finncomm had been on the lookout for a potential buyer, forcing Finnair to take action or risk allowing a competitor to step in and threaten one of its existing partnerships.
The deal with Finncomm is not an outright takeover by Finnair with the supposed aim of bringing a feeder airline into the group, but rather a strategic move designed to "safeguard cost-competitive domestic feeder traffic to its international network."
Unfortunately for Flybe, which was being lined up to provide feeder services from small destinations such as Tallinn, Tampere and Turku, the deal means that Finnair now has a vested interest in a different feeder carrier, and one which it is already familiar with.
Although the Finncomm deal is only in the preliminary phase and subject to approval from board members and shareholders, Finnair is already anticipating that its stake in FCA will increase beyond the initial 20 per cent.
In total the deal is worth around €48 million - €38 million for the aircraft stock and €10 million for the stake in FCA, including the option to increase that stake further in the future.
www.finnair.com