Conflict of interest in NAG's acronym soup?

(Siim Lõvi /ERR)
2/15/2016 10:58 AM
Category: Economy

In the small pool of Estonian aviation experts, companies as well as people are connected. ERR News takes a closer look at the organizations involved after the demise of Estonian Air.

While the Nordic Aviation Group (NAG) isn’t directly linked to them, Nordic Crew Management (NCM) and the Nordic Aviation Academy (NAA) belong to the same parent company. There are other noteworthy connections as well.

NCM, the company which supplies the NAG with crew outsourcing and training, is a subsidiary of Hiiumaa Lennukompanii (HL) owned by Estonian private aviation veteran Tõnis Lepp. HL also owns NAA, which cooperates with NCM to train pilots. NAA again is indirectly connected with NAG in the person of NAG supervisory board member Toomas Uibo, who works for the academy as an instructor.

Mr. Uibo commented on this relationship saying that NAA outsourced flight training to a company of his. He also said he offered flight practice with his own plane, and also trained NAA students in aviation law, aviation rules, and navigation. He said he only trained private pilots and did not have the competency to train commercial pilots, and stressed that he was a service provider and not a paid employee of NAA.

Supervisory boards ideally have members that are industry experts. The pool of aviation experts in Estonia is small, and it could be argued that the choice of Mr. Uibo was natural given his expertise.

Still, his connection to NAA illustrates how tightly the new national airline builds on networks between individual businessmen. In this case, Mr. Uibo is connected to a group of companies that stand to make a lot of money cooperating with NAG.

This becomes even clearer when looking at NAA itself. Until 10 November 2015, former Estonian Air supervisory board member Märten Vaikmaa owned a stake in the academy, which he sold to Hiiumaa Lennukompanii, now the sole owner.

This took place two days after Estonian Air had ceased operations. Slightly before that, on October 26, NAA was granted a training license for the Bombardier CRJ plane type, for which it now provides NCM with pilot training.

The cooperation with NAA made it possible for NCM to offer crew outsourcing services to the new state-owned airline that included a pay-to-fly scheme. This was based on NAA’s training license for the Bombardier CRJ aircraft.

ERR News’ sources say that the application of NAA for this license was submitted before it was common knowledge that the Bombardier CRJ would be the plane of choice for the new national airline. The same sources raise the question how NAA could have known that it would be this plane type for which there would be a market for training beyond Estonian Air’s expected demise.

That Mr. Vaikmaa served on Estonian Air's supervisory board while at the same time being the majority stakeholder in a company that was preparing to inherit some of Estonian Air’s business functions represents a conflict of interest that was only legally solved by his selling his stake in the academy to Hiiumaa Lennukompanii before the NAA took up work with NCM, and thus profited from the business NCM got from NAG.

By being ready to provide training for the Bombardier CRJ aircraft, Hiiumaa Lennukompanii's subsidiaries NCM and NAA gained a decisive competitive edge in the run for the chosen outsourcing supplier for NAG.

Both Nordic Crew Management and the Nordic Aviation Academy were approached for comment, but didn’t respond. The Ministry of Economic Affairs and Communication was contacted, but unable to offer comment within the 72-hour period prior to publication.

The National Audit Office responded to the same request on Friday. Spokesman Toomas Mattson pointed to an ongoing audit of how the NAG came into being, saying that they were investigating whether the government’s decisions in the matter were “wise and prudent,” and whether unjustified risks had been avoided. Their report is due to be published in March.

Editor: Dario Cavegn

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