Conciliator: Estonian Air's Position Grows Weaker with Each Day (1)

1/2/2013 10:55 AM
Category: Economy

The pilots' strike that will begin next Monday has already had an negative effect on the airline's financial standing: ticket sales have decreased, while Public Conciliator Henn Pärn said that the company could go under even before next week.

"I think Estonian Air will not be able to withstand a strike. Or maybe not even as long as the seventh of the month. With each passing, the signals to the market given through the strike notice have a impact for the worse. And in this situation, it is very difficult for the government to bail out the company," said Pärn at the end of last week.

According to Pärn, the relationship between the Estonian Airline Pilots Association and Estonian Air leadership is very messy. Pärn, who has so far only met Estonian Air's management, told ETV last week that views of both camps are contradictory.

“The strike notice is confusing and there is nothing to conciliate. There are no straightforward demands that we can embark from,” added Pärn.

According to the pilots union chairman Rauno Menning, the airline's management has not contacted them since the strike was announced on December 21 and is not seeking ways of averting the strike.

Chairman of the airline's supervisory board, Erkki Raasuke, said that the union's statement is baffling. “The claims that contact can't be made, that there are no talks, is largely a plain lie,” said Raasuke.

Jan Palmer, the CEO of Estonian Air, says that the airline's leadership has repeatedly tried to negotiate with the pilots, and adds that the union has given them an ultimatum to sign a new agreement with the pilots.

“That will never happen, so to say, because the company could not live with that. I do not have any possibility to sign such a contract,” said Palmer.

The old agreement will expire on February 8.

Raasuke confirmed that the company is not faring any better now than before. “When there is an acute risk of a strike, it seems very logical that ticket sales will suffer badly,” said Raasuke.

State bailout could arrive too late

Negotiations between the European Commission and the Cabinet are ongoing as the government is seeking permission to bail out the airline.

Raasuke said that the bailout would be between 50 and 70 million euros depending on how the company will be able to offload planes it is not using, and the financial situation at the time of the recapitalization.

The European Commission has until February 22 to come to a decision, reported Postimees.

The government announced in December that it is handing Estonian Air a 8.3 million euro loan to solve short-term liquidity problems.

Estonian Air's operating loss for the first nine months of 2012 was 20 million euros, nearly twice the 11 million euro loss suffered in 2011. Revenue is up from 59 million euros in 2011 to 70 million in the first 9 months of 2012.

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