Nordica chair: 2020 deficit will be lower than €23 million forecast by EU
Board chair of troubled state-owned airline Nordica, Erki Urva, says that forecasts the carrier will be in the red to the tune of €23 million at the end of 2020 are based on outdated information, and the real situation will be better at year-end.
As reported by ERR News, a summary of the permit issued by the European Commission giving the go-ahead to a €30-million bailout for Nordica from the Estonian state, reported that the airline was facing bankruptcy and will have made a loss of €23 million by year-end.
Erki Urva says that this forecast was based on figures in spring, during the peak of the coronavirus pandemic which grounded the majority of flights to and from Tallinn Airport, and in fact the company should end the year with a smaller deficit than that.
"It's a very difficult time for all airlines to see what's going on here. If it has just been stated that about 10 percent of Tallinn [Airport]'s volumes have remained the same as last year, and if the average load factor is below 50 percent, then everyone is burning money In Tallinn," Urva told ERR Monday.
The state aid permission came with strings attached by the commission, including €22 million of the bailout having to be made up of a share capital increase to be completed by June 2021, the remaining €8 million to be a loan to be drawn down by year end, and a freeze on executive remuneration to 2019 levels, and has not actually been granted yet.
The share capital increase must be completed by June next year and the loan drawn down by the end of this year.
Urva said that Nordica very much hoped the cabinet would discuss the measure at its regular Thursday meeting this week.
"We are still coming along very nicely now. Companies have made very big changes in their operations, we have frantically cut costs and reduced our cost base as much as possible, we have preferential terms agreed with various subcontractors when it comes to aircraft leasing and so on, so the cost base has been greatly reduced," Urva went on.
Nordica does not own any of the planes it operates. It focuses on running smaller planes such as ATR 72-600 turboprops, and Bombardier CRJ900s, and also has a subsidiary, Regional Jet/Xfly, which operate other airlines flights for them, including domestic routes in Sweden.
Undersecretary at the Ministry of Economic Affairs, Ahti Kuningas, agreed that Nordica was in good shape compared with some other airlines, which he said was vindication of its business model, noting that the €30-million bailout was small compared with that obtained by other European carriers.
"If we look at other [airline] companies, how much money has been granted - six billion to Lufthansa, €200 million to [Latvian carrier] airBaltic last year and €300 million this year, we are asking for €30 million to cover Nordica's hole, which is of a different order of magnitude than many commercial companies," Kuningas said.
Sven Sester (Isamaa), chair of the Riigikogu's Economic Affairs Committee and a former finance minister, said, however, Nordica is still likely to be tens of millions in the red.
"In and of themselves, these earlier business plans are a thing of the past. This year is still going to bring a very large deficit. This is inevitable, and it will not be very surprising," Sester said.
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Editor: Andrew Whyte