The Finnish Transport and Communications Agency Traficom has decided to impose a public service obligation on five domestic routes between the capital, Helsinki and regional hubs.
Under EU rules a public service obligation can be imposed on routes which are vital for the economic development of the region they serve. This means that if needed, access to these routes can be limited to a single air carrier and compensation can be paid for its operational losses.
The public service obligation, which will be in force between 1 April and 31 December 2021 covers routes from Helsinki to Joensuu, Jyväskylä, Kokkola-Pietarsaari, Kemi-Tornio and Kajaani airports. Savonlinna is to be added to the list at a later date.
Action is being taken to safeguard the connections that have been adversely affected by a fall in air traffic caused by the coronavirus epidemic.
Traficom Director Pipsa Eklund says that the decision was necessary to protect economic and social development interests in the regions.
Traficom intends to organise a tendering process to select an air operator on which a public service obligation can be imposed for the designated routes which will be open to any EU air carrier that can meet public service obligation criteria.
The tendering process is being underpinned by a 11.5 million euro appropriation for air transport contained in Parliament's latest supplementary budget.
The chair of the Swedish People's Party, and Justice Minister Anna-Maja Henriksson welcomed the move, saying in a statement issued on Wednesday that it will help companies in these regions deal with the impact of the coronavirus crisis.
“Finland lives on exports and it is important that Finland has enough airports, good connections and access to different areas,” Henriksson pointed out.
“Businesses depend on customers being able to get to their region and to be able to get to Europe and the world quickly from their regions”, she adds.
400 million loan to Finnair
At the same time as regional airports are starting a search for carriers, the State of Finland is preparing to make up to 400 million euros available to Finnair in the form of an unsecured hybrid loan.
The facility will be structured so that Finnair is able to access the funds, if its cash or equity position would drop below the limits to be defined in the facility’s terms and conditions.
At the end of the third quarter of this year, Finnair’s equity was 940 million euros and cash reserves were 725 million euros.
In a release on the loan arrangements, Finnair’s CEO Topi Manner, stated that the airline entered the pandemic with a strong balance sheet and cash position. And now wants to ensure that it gets through this exceptional period and continue its strategy of connecting Asia and Europe.
He described the loan as an important facet in ensuring Finnair's financial stability if the recovery in air traffic is slower than expected.
The state-supplied hybrid loan will require approval by the EU Commission.