The government has said it is planning to give Estonian Air a 40.7-million-euro bailout for which it must request permission from the European Commission.
The nationally owned air carrier, teetering on the verge of bankruptcy, has submitted a restructuring plan that was discussed by the Cabinet today.
Officials stressed at a government press conference today that the planned bailout sum is less than what analysts had initially estimated was needed to save the company from bankruptcy.
Minister of Economic Affairs Juhan Parts said the restructuring plan provides that Estonian Air reach profitability in 2015.
The European Commission is currently examining the legality of previous loans and aid packages to the company with regard to competition laws and excessive reliance on taxpayers. One of the specific issues being examined by the commission is the suspected violation of the condition that governments can only give rescue aid once every 10 years.
The Estonian government bought back most of the airline's shares from SAS in 2010. Since 2009, the airline has received state aid on numerous occasions, including three capital injections totaling 57 million euros.
A new direction
The restructuring plan marks a turn to a more economical, less ambitious path from former CEO Tero Taskila's program of building Estonian Air into a major regional carrier.
After announcing massive financial losses last year, the company has laid off more than half its staff and cut its number of aircraft, flights and routes. It is also selling properties and subsidiaries.
The company reduced its routes from 24 to 10, but if all goes well it may offer a few additional ones by 2015.
Estonian Air currently has 200 employees on its payroll, down from 340 last year, and is set to eventually make due with 150.
The fleet has been reduced from 13 to 10 aircraft, and will decrease to five in 2015.