Tallink Group acting to stimulate ‘core business’

By Luke Barras-hill |

Baltic-Queen

Source: AS Tallink Gruup/Marko Stampehl.

AS Tallink Gruup (Tallink Group) has not ruled out pursuing future expansion opportunities ­at airport shops when the time is appropriate, TRBusiness has learned.

In an exclusive interview, Aimar Pärna, Head of Duty Free said: “Our current focus is on the restoration of our core business and services for the time being. Once we have managed to do that, we will return to all other plans and projects in due course.”

The Baltic cruise and ferry company confirmed to this publication in September that it was actively considering bid opportunities at international airport shops.

Akin to most businesses, the coronavirus (Covid-19) pandemic has dealt a significant blow to the Estonian firm’s commercial operations, especially onboard its Tallink and Silja Line vessels.

“Due to the sharp fall in passenger numbers since mid-March, onboard sales were strongly affected,” continued Pärna. “Results since then have been well below expectations.”

aimar-pärna-headshot

Aimar Pärna, Head of Duty Free, AS Tallink Gruup.

BILATERAL DISCUSSIONS

It is now widely acknowledged that the catastrophic, sustained and deep blow to global travel and tourism, including in the aviation and maritime industries that DF&TR ably supports, will take time to recover.

As reported, ACI World suggests it will take three years for passenger numbers to return to pre-Covid-19 levels.

The situation has been exacerbated by the severe economic black hole and slump in global equity markets that will require precision and agility from public and limited companies alike to battle their way back to better times.

Tallink Grupp reported a 13.4% decline in unaudited consolidated revenue to €154.9 million/$176.3 million in the three months to 31 March.

Restaurant and shop sales on-board and onshore declined by 15.7% to €86.9 million/$102.3 million.

Passenger volumes plummeted by 59.3% in March in a month when seven vessels were suspended amid travel restrictions and the declaration of states of emergency in various markets.

“Before the passenger numbers plummeted from mid-March, shop sales were very good and onboard shops performed well, explained Pärna. “But as more than half of the normal passenger flow was lost in the second half of March, the impact on sales was significant.”

At the time its Q1 results were issued in late May, a mere five of the company’s 14 vessels were in use.

Tallinn-Stockholm route vessels Baltic Queen and Victoria I were suspended from 15 March; Latvia-Sweden route vessels Romantika and Isabelle followed from 16 March; and Helsinki-Stockholm route vessels Silja Serenade and Silja Symphony from 19 March.

Silja Europa trips on the Tallinn-Helsinki route were suspended from 17 March and shuttle vessel Star from 18 March.

Damage limitation has taken the form of tight cost-cutting measures, negotiations with existing partners and suppliers, close collaboration with governments and the launch of new revenue streams.

“The whole travel retail industry is in a weak condition right now and it will take time before business returns to normal levels,” observed Pärna. “The process of recovery is currently also still unpredictable. In this situation, we are trying to reach different agreements with our partners in order to secure the sustainability of the company and restart our operations at the first opportunity.”

One of the major hurdles is warehouse stock management and movements, stifled by sizeable passenger volume declines. Recent levels dropped by 95.9% in April and 91.2% in May year-on-year.

Until the travel sector witnesses an uptick in numbers, stock challenges will undoubtedly remain. Asked how Tallink is supporting its supplier and brand partners through this veritable nightmare, Pärna responded: “Above all our aim is to reach bilateral agreements with our good partners in order to jointly overcome the current challenging times and to ensure that cooperation is restored soon and will continue for a long time.”

PENT-UP TRAVEL DEMAND

One important sign of progress occurred last month when Tallink restarted essential passenger services on the Tallinn to Helsinki route and recently added extra departures for shuttle vessel Star.

“The passengers currently travelling on the Tallinn to Helsinki route are mostly commuters and those with unavoidable reasons for travelling,” said Pärna. “Thus, as the profile of travellers is not comparable to the pre-crisis situation, the sales can’t yet be compared to those at the beginning of the year or with the same time last year.

“The increase in passenger numbers has helped to improve the sales somewhat, but people who currently travel, are mostly not primarily focused on onboard shopping.”

But that could change sooner than expected as people across the Baltic and Nordic nations are clearly eyeing the potential to travel this summer.

Recent research conducted by Tallink among more than 5,600 of its Club One loyalty programme members in Estonia, Finland and Sweden revealed that the vast majority would be inclined to travel somewhere if travel restrictions are lifted.

Star-Tallink-horizontal

Tallink vessel Star began extra services on the Tallinn to Helsinki route on 14 May after Finland’s government relaxed restrictions on passenger ferry travel to the country. Source: AS Tallink Gruup.

For example, in Finland – which accounts for nearly half the group’s travellers – 48% said they are planning to travel to Tallinn in Estonia this Summer and 27% have their eyes on Stockholm in Sweden.

Approximately half of the respondents in all three countries said they would like to go on a short cruise to neighbouring countries this summer, should restrictions lift.

In a separate survey in Finland, respondents’ considerations for travel when restrictions lift are topped by safety (75%), hygiene (71%) and a good selection of restaurants and cafes (68%).

While passenger services slowly restore, the group’s web shops have taken on a more important commercial onus. Unsurprisingly, this is expected to continue.

“Online shopping has gained significant importance during these times of travel and movement restrictions and shop closures during the states of emergency in Estonia, Finland and Latvia,” commented Pärna.

“Thus, we can definitely see that there has been an increase in online shopping users and in the frequency of purchases. Our web shop is an increasingly important sales channel for us and we definitely plan to develop it strongly further together with our other retail operations. We are making constant efforts in order to recover our retail operations as soon as possible.”

The Group has been negotiating with financial institutions regarding waivers for loan covenants and payments schedules and this week signed a working capital loan agreement at a €100m limit that is drawable in tranches of €10-40m. This has been secured by mortgages on five vessels ranking after the existing creditors.

The number of shareholders in the firm has also jumped during the crisis, signalling investor confidence moving forward.

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