Minister Ponders Life After Possible Denial of State Aid to Estonian Air ({{commentsTotal}})

Estonian Air's new Embraer aircraft emblazoned with the carrier's new design Source: Photo: Courtesy Estonian Air

Thinking ahead to what she called a real possibility that the European Commission will deem the Estonian government's cash injections into the national carrier as ineligible state aid, Economic Affairs Minister Urve Palo proposed two alternative courses of action - starting over with a new company, and increased cooperation with Latvia's AirBaltic.

"There won't be a decision from the EC before fall. But if it proves negative, that will not mean anything good for our national carrier. There's no place to go for that 70 million euros. There's no money for both repaying the state and continuing in operation," Palo said a radio interview on Kuku.

Palo pledged to step up lobbying efforts. "What we can do is influence the commission. We hope that if Estonian Air gets more or less on and follows the restructuring plan, the commission will not dare or want to shut down an operating airline. We are a periphery and it's very important for us that direct flights take place."

Estonian AIr has largely turned things around under current CEO Jan Palmer after a spate of problems under the previous management.

Still, Palo said that a rigorous view of the cash injections administered into the struggling airline over the past few years would reveal that they were not really eligible under EC rules. For now, she said, it behooved Estonians to trust their carrier, buy fares, travel - all to keep the company afloat.

If Estonian Air went bankrupt, Palo said the priority was to make sure Estonia had direct flights to regional destinations that could be hubs for further travel.

"There are a number of possibilities - one is to establish a new company. Again the state would have a stake and maybe the private sector would be on board. Another option is to work with Airbaltic. That they would keep a certain number of aircraft here in their home port, so to speak.

"If anyone has an even better idea, it can be discussed, there are currently those two options on the table."

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