Economy Minister Kristen Michal said that an Estonia-based airline must expand to be able to survive.
The state recently began setting up a company in case the European Commission ruled against national carrier Estonian Air, in a loan versus state aid case, forcing the Estonian Air into bankruptcy. The new company would then take over routes flown by the current national carrier. The moved reignite debate over state-owned Estonian Air, which last made an annual profit in 2005.
“It is very tough for a small airline in Europe. We know this as many have gone bankrupt and many are in the red. In reality, only a few airlines in Europe are making a profit, although fuel prices are low,” said Tallinn University of Technology professor Karsten Staehr.
Michal said Estonian Air has shown in the past half a year, that the restructuring has somewhat succeeded, adding that an airline based in Estonia could not survive flying on such a small scale.
Michal said they have analyzed the possibility of Latvian airline AirBaltic taking over Tallinn's air connections, adding that this would be significantly more expensive for the taxpayer than the current solution.
Jaan Tamm, the head of Infortar, a private company which has said it is willing to take Estonian Air off of the state's hands, said his company has not decided if they would be interested in the back-up company, as they would have to buy in flights from other companies until it has all the required licenses.
Tamm said the back-up company is a logical and rational step, but if it does take over, then the privatization process would have to begin from scratch.
Michal said if Estonian Air does go under, customers who have purchased tickets for the future will be helped out.
Editor: J.M. Laats