The European Commission's Director General for Mobility and Transport Henrik Hololei believes that the Baltic countries could have a single strong airline with a wide customer base. Hololei tells ERR in an interview that Estonia needs a strong aviation cluster that does not just stand for an airline but also includes a lot of other elements to promote aviation development.
How long could it take to secure a state aid permit so Estonia could place €30 million into national airline Nordica? Minister of Economic Affairs and Infrastructure Taavi Aas has said he hopes it will happen in June.
It is imprudent to talk about deadlines in such matters involving state aid. While there might be great anticipation for decisions to be made soon, information might be missing or withheld. All of it takes time and cannot be programmed with any measure of accuracy. And that is why every case is different. It would be very difficult to make predictions here; however, the Commission has attempted to make decisions as quickly as possible in all cases falling under this so-called extraordinary jurisdiction. If all the information is there and necessary analyses completed, I see no reason to drag out the process.
Is it possible a permit will not be issued?
Such forecasts simply aren't made. It is a process of mutual negotiation that is also confidential. However, I believe that well-reasoned state aid applications will be supported and approved. As we know from other major state aid cases, such as that of Lufthansa, the conditions included a lot of different measures. In Lufthansa's case, the entire package would have been rejected by shareholders. While they ended up agreeing last week, it was a tense negotiation as the aid permit called for compensation measures that were not to shareholders' liking. That is to say these are complicated matters. We shouldn't expect compensation measures to be required in the case of Nordica as it has no market influence to speak of.
Former transport commissioner Siim Kallas told ERR in an interview that he would not place a red cent in Nordica. That it is taxpayer money and Nordica lacks a future beyond two or three years.
Siim Kallas has always had a good analytical mind and sharp ideas. I agree with most of his positions. However, as concerns the case at hand, it is up to the Estonian state how to use taxpayer money to support struggling companies. If the Estonian government has decided to boost Nordica's equity or recapitalize the company, it is the sovereign decision of the Republic of Estonia. And because it falls under the temporary state aid framework, it requires a permit from the European Commission. It is a question of choices. And the state's choices are based on political decisions that are in turn rooted in economic analyses.
Is it not a good time for the three Baltic countries to pool their resources? AirBaltic is clearly the largest and most successful airline in our region. Since it's also permanently on sale, why couldn't Estonia and Lithuania acquire 33.3 percent each, with Latvia keeping the final third. We would have a single and relatively strong regional airline. What do you think about that?
I like your use of the word "relatively" because the scope would still be modest. However, I have liked the idea for the past decade or longer. It should be seriously considered and investments made into a corresponding analysis, while I believe the train has left the station today. There have been openings in the past ten years, but it is very difficult to imagine in the current situation.
AirBaltic is also looking at state subsidies. Support from the Latvian government is nearly guaranteed as analyses have been completed and a [European Commission] decision is expected imminently. AirBaltic will definitely survive as it is the only serious local airline in the Baltic region. Furthermore, airBaltic is more interested in finding a strategic partner than working with states. I find that countries should not be involved in aviation that is a very open field globally. European aviation is operating in the conditions of a fully open market and I find that companies that have private owners and investors are in much better hands.
It seems unrealistic to me that the owners of airBaltic would be interested in bringing another two countries on board. I believe the right time has passed, which is not to say there will not be opportunities in the future. I also feel a serious enough analysis is still lacking. Because aviation is largely a mass business and having a region as small as the Baltics simply makes it impossible to have a very strong airline with a comprehensive customer base. One company is definitely enough. Speaking in favor of airBaltic as that one company is the fact they've made the right decisions in choosing their fleet.
Listening to you as an Estonian taxpayer, knowing that airBaltic will be given €250 million and Nordica €30 million, I cannot help but ask myself why we even bother compared to what's happening in Riga.
We have always been of the mind that Estonia needs an airline. I've been saying for years that it is important to have planes fly out of Estonia – so they could take off in the morning and land at night in Estonia. I've also said that the livery on those planes doesn't really matter. Estonia needs its own aviation strategy and cluster. The latter, for me, does not just stand for an airline offering its services in other countries but is rather part of a much bigger whole. Estonia has the highly successful Magnetic MRO and other strong players, a strong aviation academy and the Tallinn Airport.
Aviation usually involves a lot of high-tech as well as high-paid jobs that require special training, also innovation. Aviation has a crucial role to play and it is important to keep the cluster afloat. The question, as always, is how much support can be made available. These are political choices. While one might agree or disagree, one must always hope they are successful. Why couldn't Nordica live up to expectations again and start offering direct flights to other European cities sporting a good price-quality ratio?
You have served as economy minister. Were you the Estonian prime minister today, would you phone your Latvian colleague in regard to having a common purpose to benefit everyone?
That is an excellent theoretical question. I believe staying in touch is necessary and that crises offer a perfect opportunity to make radical changes. However, the latter cannot be based on a gut feeling where serious analysis is needed. Should analyses suggest the idea has merit, that is when we should start paying more serious attention to it.
Is Lithuania's plan of creating a virtual national airline that would only sell tickets, with flights operated by existing airlines, simply a threat to get cheaper Lithuanian airline tickets from airBaltic or are they serious?
Virtual airlines are nothing new. They go back 40 years. In some ways, Nordica is also a virtual airline today as its main business is not flying out of its home airport so to speak. The company is active on a different market that provides its profit. Having smaller airlines operate flights for others is entirely normal. I do not quite understand what the Lithuanians are planning. The ticket sales platform is one of the most complicated and expensive components of an airline, as we know firsthand in the example of Nordica.
The ticket systems they've used – first Adria and then LOT – were picked because it is not cheap to have your own system, which is one of those things that has kept Nordica from developing. Those are not easy investments to make. I believe the Lithuanians mean well, but I don't know where it will end up. The important thing is to have real airlines and planes to service the connections. They are trying to find new business models. Modern solutions make developing business models very different from 10 or 20 years ago.
Do you believe Nordica will still be around five years from now?
I hope so. Why not? We all hope we will have more competition and better links from Tallinn. Nordica could play a far bigger role. It has not been the biggest player at Tallinn Airport for some time – airBaltic is. Recapitalization would allow for new goals. And as far as I'm aware, state financing also includes certain conditions. So, we will have to wait and see, but we definitely need to wish Nordica well and keep our fingers crossed.
Editor: Marcus Turovski