Dance around Estonian Air could lead to confidence crisis, says expert (2)

Estonian Air's Embraer
9/16/2015 12:19 PM
Category: Economy

Aviation business expert Toomas Peterson said people currently do not have much faith in the future of Estonian Air, and that could lead to a crisis of confidence.

The state recently said it will set up a separate company, in case the European Commission rules against the airline, and Estonian Air is forced to go bankrupt, and build a new airline from that company.

Peterson said this is not an unusual step and has been used elsewhere in Europe.

He said the company might not be able to take over all the routes in time, adding that even if the new company buys in full flight services, hires planes and staff to run Estonian Air old routes, it could take two to three months. “What I have heard from top officials is that there might not be a decision [by the commission] before Christmas, so few months of a buffer zone is there,” he said.

People are not confident about the company's future, he said, adding that this could lead to a crisis of confidence as a airline sells trust, when it sells tickets for future flights.

He said he hopes Estonia will still have a national carrier, either Estonian Air, or Air Estonia or by another name, adding that Estonia's problems lie in its remoteness, small market and relatively low wealth. Peterson added that any national airline would need to be subsidized, adding that 5-6 aircraft flying every day to around 10 destinations would cost the state an additional 10-15 million euros annually.

The company has improved performance, he said, adding that the leadership with grand plans has been replaced by leaders who are more pragmatic, and who understand the means and possible future scenarios.

Estonia needs connections

Estonian Air CEO Jan Palmer said he is still hoping for a positive decision from Brussels, which would see state aid given to Estonian Air as legal, meaning the company would not have to pay them back immediately.

Palmer said he backs the state's decision to set up the back-up company. “We are following the restructuring plan, which was approved two years ago. Currently, it looks good for Estonian Air,” he said.

“A nation like Estonia needs very good connections, so as to market itself in Europe. And this will not come, unless someone takes responsibility for flights operating from Tallinn,” Palmer said.

J.M. Laats

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