Palmer Hoping for Positive EC Decision on Estonian Air

Jan Palmer Photo: ERR
2/6/2014 5:08 PM
Category: Economy

Estonian Air's CEO Jan Palmer said in an interview with ERR's Maarja Roon on Thursday that he hopes the European Commission will OK the 40.7 million euro state loan to the national airline.

Yesterday the Ministry of Economic Cffairs said that the European Commission's investigation is a good thing. Do you agree with the statement?

Yes. The situation for the company right now, when we don't know what the situation for us will be in the future - that is also not so very good. We hope, and are pretty sure they will make a positive decision, because the restructuring plan we have is pretty good and we have also shown that during this first year we have been in line with the restructuring plan all the time.

We have also proven that we can meet everything we said one year ago. The restructuring plan is a long-term plan, it goes all the way into 2017, when we will hopefully become a sustainable airline and that is the important issue for the European Commission.

Why did they start the investigation only now?

We have applied for state aid and at a certain point in time we knew that this was coming. This was expected, so to say. However, they [the Commission] haven't been able, they haven't had time so far. We sent it I think already in January last year, so it is more or less one year since they haven't done anything about the application.

It was expected that they would start this investigation, because we have applied for it, it is a pretty normal procedure, so to say.

How real is the possibility that they would make a decision which would force Estonian Air to go bankrupt?

It's really hard for me to speculate on that. I can only hope that they understand our decisions. For the country of Estonia it is really important to have good connectivity with the markets around and with the eastern European countries. […] I can only hope, I won't speculate.

I think we are doing a good job with Estonian Air and I hope they will appreciate that.

Are there any past precedents that make you believe that the European Commission will make a favorable decision? This is not the first time a state airline is under investigation.

No, it's not. A number of state airlines have been scrutinized by European competition authorities. There are a number of positive decisions, but also a few negative decisions. The negative decisions have been those where the airline didn't actually do anything, but was continued to be paid by the government.

The positive decisions were airlines who have actually done something about the decision and changed their business to become more sustainable and more profitable.

I think we are in the second category, we did something about our situation.

Along with that investigation, Estonian Air is also currently having negotiations with the pilot's union. Both sides - Estonian Air and the pilots' union - have said that the other side has used delaying tactics.

That's not really correct. We presented a proposal with three alternatives for the pilots' union on December 12. That was after many meetings, discussions and negotiations with them. Only two days ago I received from ELA [the Airline Pilots Association]. So if somebody has been delaying, then it's not us, it's the pilots' union.

The pilots say that Estonian Air has used European Commission's investigation as an excuse and that their demands don't have anything to do with it.

That is totally wrong as well. In our restructuring plan there was a precondition that the company would find new collective agreements with both the pilots' union and the cabin crew union, because the unions' productivity was too low. We did that one year ago with a new collective agreement and that was part of the restructuring plan we presented to the European competition authorities. We have to follow this plan all the way up to 2017. That is what we are aiming for. The pilots' agreement part is also something that will be looked into by the European Commission's officials when they do the investigation.

So that's totally wrong. But that's not the only thing - the other fact is that we have to look into the company, if we can be a profitable airline in the future. From the kind [of] requests we have seen so far from the pilot's union, the company will not be able to survive.

Why has it taken Estonian Air and the pilot's association almost two months to find a date when they can meet?

We have had a number of meeting with the pilots' union. Also, the pilots' union has had one day off every week where they could sit down and work together, come up with questions and proposals for us. Two days ago we received their proposal, so they have taken quite a long time to come back with a proposal for the company.

When you meet next week, do you think you can reach a compromise?

There is no reason to speculate. We have given them a proposal which we think we can deal with and they have come back with something that is far away from that. To find a compromise with that, at the moment, it doesn't seem very promising. But hopefully we will continue to discuss and we can also convince them that our proposal is acceptable for them.

These kinds of collective agreement discussions take place every year, so we just have to go through it and find something both parties can accept and appreciate in this situation. This is part of the normal discussions for an airline.


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