Case Study:
“Estonian Air’s Big Buy”

Case Study Information:
Karen Popovich, Diane Lander, and Robert Letovsky (2011). Estonian Air’s Big Buy. Case Research Journal, 31(1), Pages 67-82.

Executive Summary

Estonian Air is a regional airline carrier headquartered in Estonia in the Baltic region of Europe. The airline’s hub of operations is located in Estonia’s capital city of Tallinn at Tallinn Airport. This airport is the largest in the country. With the state government of Estonia owning a large equity percentage of the airline, Estonian Air is the national airline of the Country of Estonia. The Company currently operates a fleet of four aircraft providing flights to sixteen destinations throughout Europe.

Within the
Because of the request by Estonian Air’s management, we will briefly touch on TCO analysis, but primarily focus on decision-making.

Strategy & SWOT Analysis Overview

In order to better facilitate discussion about the internal and external environment facing Estonian Air, we have provided a brief SWOT analysis. This model provides an overview of the company’s leverages, constraints, vulnerabilities, and problems.

Estonian Air’s key strategic goal, as stated in their annual report, is to “ensure sustainable and profitable growth through target markets, customer satisfaction, fleet renewal, and employee development.” -Estonian Air Annual Report Strengths * Recent Year’s Positive Results * Meeting Industry Standards * Enviable on-time record * Backing of Estonia Government * Lower Borrowing Costs | Weaknesses * Small Fleet * Increasing technical problems and O&M Costs leading to unscheduled downtime * Weakened Balance Sheet * No Economies of Scale | Opportunities * Internal Analysis indicates 10-15% Growth * New Routes | Threats * Economic Downturn * Rising Fuel Costs * Exchange Rate Volatility * Growing Competition | Based on the above analysis, it is clear why Estonian Air is ready to “implement a growth strategy and invest in the development of its fleet.” Given the opportunity to grow their market, challenged with their small fleet and increasing difficulty of