Flybe Nordic success could spur Baltic expansion: French

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Flybe may look to build on the success of its Flybe Nordic operation, a joint venture with Finnair, through an acquisition in the Baltic region.

Flybe Nordic received 12 Embraer 190 jets from Finnair in October, bringing its fleet size to 28 aircraft, including 21 deployed on contract flying. The subsidiary expanded its network from 29 to 37 routes across the Nordic and Baltic regions following the asset transfer.

Group chief executive Jim French, speaking on a first-half 2012 earnings call, admits that Flybe Nordic is still "digesting" the new aircraft and has no plans for further fleet expansion. However, he says the parent company is pursuing similar opportunities elsewhere.

"There are other discussions where people are actually saying, 'Could you replicate what you've done in Finland?'," French confirms.

"The model in Finland really has been an excellent one, where we've been very innovative in terms of helping [Finnair] with the transition of crews into the new organisation, so it's been quite a test model that a lot of other people are looking at now."

Asked whether Flybe would consider a minority holding in Estonian Air in the event that SAS Group divests its 10% stake in the loss-making Baltic carrier, the chief executive said: "I wouldn't rule out anything that's of interest to us. We're looking at the market.

"That whole territory is in a state of change and flux. We got into that market 18 months ago. We've got one of the most respected partners in the area through Finnair, who are publicly saying how well it's gone."

In October, SAS Group announced a new round of cost-cutting measures that will include the disposal of "non-core assets" worth about SKr3 billion ($450 million). Alongside its Estonian Air holding, the Scandinavian carrier has a 37.5% stake in Air Greenland and operates subsidiaries Widerøe and Blue1.

Also last month, Estonian Air appointed a new chief executive, Jan Palmer, after its board decided to move away from the expansion strategy favoured by predecessor Tero Taskila.

While French says that Flybe will continue looking at opportunities across mainland Europe to lessen its dependence on the UK market, he insists that acquisitions and joint ventures are not the only options on the table.

"We're being very cautious," the chief executive says, noting that Flybe's decision not to invest in BMIbaby allowed it to "pick up some nice routes" at East Midlands airport following the closure of the BMI subsidiary. "There is so much going on in Europe, we don't need to buy things. Let's just see what opportunities there are."

Flybe Nordic's fleet comprises 12 E-190s, two E-170s, 11 ATR 72s and three ATR 42s. French says the fleet is unlikely to grow significantly over the next 24 months, though the parent company is willing to transfer some of its Bombardier Dash 8 Q400s to the subsidiary if required.