Review of Options to Secure Connectivity to and from a Northern European State
The government of a northern European state asked Nyras to provide a study on connectivity to secure the future of a national airline.
The government had been the owner of the national airline, which ceased operations in the midst of financial difficulties. Together with private investors it supported a new airline which faced key challenges in view of the peripheral location of the home market and the relatively small number of city pairs in which profitable operations could be run.
The client sought guidance on the following issues:
- Identifying sustainable connectivity to its market on a year-round basis.
- Securing high yield business traffic in the knowledge that demand for air services to and from the state was being flown indirectly via neighbouring hubs.
- Analysing activity of countries facing similar difficulties.
Nyras established a consortium with both an international and a local law firm to submit a joint proposal. We provided commercial, economic, regulatory and political insight while working closely with our partners to harness their legal expertise. The study identified several peripheral EU countries, which can be considered as niche markets, and evaluated each. Using knowledge from our portfolio of work within these countries, Nyras was able to provide added detail.
Issues of national connectivity were considered, along with limitations imposed by the application of a public service obligation and other incentives. Using our thorough methodology, we avoided any approach that could trigger state aid concerns. The study confirmed that most established options (including state aid) were not viable as a basis in which to secure international air connections.
The document submitted formed the basis for informed discussions within the government. The information provided was used to evaluate a strategic investor to buy a portion of the shares and to extensively code share with the national carrier to complement the network of the investor. The government adopted the recommendations to focus on concrete legally feasible measures in the market and identify political steps required to put into place the current EU legislation regarding the specific requirements placed on peripheral countries.