State-owned airline Nordica needs an injection from the state to be prepared to operate flights out of Tallinn once the coronavirus crisis that has completely cut Estonia off from Europe ends, CEO of Nordica Erki Urva tells ERR in an interview.
Deputy secretary general of the Ministry of Economic Affairs and Communications told ERR that the state is considering placing additional money in Nordica to ensure passenger and cargo links after the crisis ends. How much do you know about these plans at Nordica?
I would not call it a plan… We find ourselves in a global economic and aviation crisis and almost all airlines in the world are asking countries for help. Nordica included.
Latvia is discussing giving airBaltic €150 million, SAS and Finnair have been given state guarantees stretching into billions of Swedish kronas. Everyone is doing it. Naturally, we have turned to our government.
We plan to make use of measures already announced, such as unemployment insurance benefits.
We told all of our employees that we can only pay them minimum wage because there is no work already back in mid-March. I would also mention KredEx options as our subsidiary Regional Jet will certainly apply for a liquidity loan from the agency.
It is rather likely that connections from Tallinn will not be restored in recent volume for some time once the crisis ends. Could state aid help Nordica fly to destinations that are important to us?
We are absolutely convinced that the number of connections out of Tallinn we had in February will not be restored for a long time. Not this year or the next.
The state has given Nordica a single task – to have the capacity to relaunch flights out of Tallinn. And we undoubtedly have that capacity. Talking about support and aid today, it is a matter of survival.
The question is whether Estonia needs an aviation sector or not. It is not just about Nordica. We are sometimes criticized for our subsidiary flying outside Estonia and catering to other clients.
But we need to see the big picture – that is the guarantee of our capacity, to have an airline that has the aircraft and can start flying out of Tallinn at a moment's notice.
In light of events today, what is your opinion of the decision from last year for Nordica to stop flying and concentrate on subsidiary Regional Jet instead?
I dare say it was the right decision. Had we not grounded Tallinn flights last fall, we would be in a world of trouble today. We would have been forced to fly empty planes for a very long time.
You said Latvia is considering giving airBaltic €150 million in aid. What kind of sums could we be talking about in the case of Nordica to ensure its survival and capacity to start flying as soon as necessary? Is it in the same ballpark?
It is not in the same ballpark. But I would not like to speculate in terms of sums. Things are moving so fast that no one knows how long we will be in this situation and when it will end.
I have heard very different predictions by various airlines. Some believe nothing will happen before fall, while more optimistic voices say we will see partial recovery in summer. No one knows for sure.
What has Nordica done to cut costs and survive this difficult period?
We have taken our expenses down to the bare minimum. We have negotiated with leasing providers to freeze and postpone payments. And I already mentioned what we have decided regarding our staff.
Our subsidiary Regional Jet has closed several bases outside of Estonia – Warsaw, Vilnius and other places. A layoff warning has been delivered to people in Sweden and Denmark. We are doing everything we can, while expenses cannot be taken to zero.
To be honest, we are even flying in limited capacity. We flew a rescue mission to Stockholm on Tuesday and are planning another one. But these are individual flights aimed mostly at bringing Estonians home.
State aid proved fatal for Estonian Air. Is state aid for the aviation sector permitted in the current situation?
Yes, while there are different measures. But yes, under certain circumstances, aviation is one sector where it is possible. Talking about the fate of Estonian Air, it happened in a normal market situation where almost all airlines in the world were turning a profit. Then we could say it was illegal state aid given to a company that was struggling.
The situation today is completely different. It is something all countries are doing or have already done. It was the same when the twin towers were attacked in USA. Virtually all airlines received extraordinary support and no one raised the question of illicit state aid.
What the European Commission has done so far, allowed €800,000 to be made available to all companies… It is a very modest sum.
The rules are different in aviation and our legal counsels have said it would not constitute illegal state aid in the current situation.
Everyone is having a hard time. One would be hard-pressed to find a sector that's thriving. But the Estonian aviation sector – some estimates suggest Tallinn Airport and the rest of the sector generate 3.2 percent of the Estonian GDP – it is a little too much to simply let slip away.
Editor: Marcus Turovski