State stripped Estonian Air of assets before fall, says expert
The state knowingly stripped national carrier Estonian Air of many of its assets before a decision by the European Commission condemned the company into bankruptcy said Jüri Sirel, head of an Estonian Bar Association committee on insolvency.
“I do not know the exact details, but looking at figures from last year's financial report assets have decreased by 53.8 million euros in one year,” Sirel told Postimees, adding that the company did make a loss last year, but its seems like they already knew the decision [from the European Commission] would be negative and made preparations for bankruptcy.
He said this looks bad as the state should not be using such methods.
“It is very embarrassing to read an opinion that assets have been taken out of Estonian Air. To put it simply – if you have an apartment and a mortgage, then they cancel each other out. If one were to just read the assets side, one can tell the entire world that assets have disappeared suddenly, although loans have been repaid too,” Ahti Kuningas, head of Estonian Air's supervisory board, said.
He added that Estonian Air has nearly 60 million euros worth of assets. All aircraft have operational or financial lease contracts, but are listed as fixed assets in financial reports. The company has financial commitments according to the contracts until 2023, Kuningas said, adding that those sums are mentioned in the reports.
Estonian Air jets purchased by state
Transpordi Varahaldus, a separate company created by the state before Estonian Air closed, has purchased the leasing contracts of three Estonian Air aircraft for 31 million euros from a Canadian export agency.
Had Transpordi Varahaldus not purchased the aircraft, these would have been returned to Canada. The company has announced a tender to rent three aircraft out. Participating in it will be Nordic Aviation Group, another company set up by the state before Estonian Air's demise, which in long-run will be looking for several more aircraft to rent.
Ergo Brumfeldt, a board member at Transpordi Varahaldus, said the jets will be rented out for 10 years.
Jaan Tamm, CEO of Nordic Aviation Group, said they are looking in to other manufacturers too, to build up their fleet.
The state created Transpordi Varahaldus and Nordic Aviation Group a few months ago in case the European Commission ruled against the Estonian state. That decision was made a few weeks ago, meaning that state aid given to Estonian Air was deemed illegal and would have to be paid back in full, plus interest. Estonian Air did not have that kind of funds and folded.