Minister: Nordica key lifeline for Estonia, no plans to privatize

Nordica logo.
Nordica logo. Source: ERR

Economics affairs minister Taavi Aas (Center) says there are no plans to privatize state-owned airline Nordica.

"I can't say we have a plan today [for privatization]. Our first plan today is for Nordica to survive as an airline," Aas said, responding to media reports that privatization would be a necessary alternative to a European Commission requirement to pay back state aid granted as relief from the effects of the coronavirus pandemic.

"We certainly don't have any plan to sell Nordica today, because in today's situation there is no opportunity to do so. First we need to get the company up and running and then make the ensuing decisions."

Aas also said that Nordica was essential as a lifeline in and out of the country.

"It is needed only for the reason that we have an ' emergency exit', so to speak," Aas noted.

At the same time, Aas said he does not rule out privatization being on the agenda in future.

"With airlines, as with any other type of transport company, aspects need to be considered very carefully - whether to privatize it, and if so, to what extent; to perhaps leave the state with some residual role in the process in the future, for instance," he added.

As reported by ERR News, while the European Commission approved planned state aid to Nordica of €30 million, the domestic government has yet to implement this.

On the other hand, the media has reported that the airline may face bankruptcy by year-end if it does not make use of the aid.

While the state aid permit comes with other strings attached, including a European Commission requirement to apportion the money into an €8-million loan and the remaining €22-million as a boost in share capital, along with a freeze on top executive pay for this year and a requirement the funds not be used for aggressive market expansion, the economics affairs ministry claims that the commission will be proposing alternative solutions in due course.

Most of Europe's state-owned airlines have applied for and/or been granted state aid in the wake of the coronavirus pandemic which saw most flights grounded during its peak, with many figures dwarfing the sum Nordica wants – for instance €6 billion to German airline Lufthansa, and €286 million for Nordica's Latvian competitor airBaltic.

Riigikogu economics affairs committee Sven Sester (Isamaa) said that if the state is really interested in maintaining a direct flight link in and out of Estonia, it should be ready to provide support accordingly, as well as the airline operating as such.

"If Nordica is only an outsourcer, if it only outsources abroad, then in the long run I don't see the need for the state to be involved, even if the company makes a profit," Sester, a former finance minister, said.

Sester was referring to Nordica's business model, which involves leasing smaller aircraft, such as ATR 72-600 turboprop planes and Bombardier CRJ900s, rather than owning its own.

In addition, a significant proportion of Nordica's business and in fact the main profit earner in pre-coronavirus times is its subsidiaries Regional Jet and Xfly, which operate flights for other airlines using the latter's liveried planes.

Aas said that he hoped a cabinet-level decision would be coming next week.


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Editor: Andrew Whyte

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