The government confirmed on Thursday to support Nordica's share capital by €22 million and provide a loan of €8 million to the struggling airline.
Minister of Economic Affairs Taavi Aas (Center) received authorization from the government to vote for increasing the share capital of the company as the minister responsible for involvement in Nordic Aviation Group.
In addition, the government decided that Aas can formalize the state aid package to Nordica once discussions about acquiring Polish airline LOT's stake in Regional Jet OÜ, a subsidiary of Nordica, have concluded.
The government received permission from the European Commission to support Nordica to the amount of €30 million in August. The purpose of the state aid is to help cope with the difficulties caused by the coronavirus.
"As a result of the discussion in the Cabinet today, the specifications will be clarified and I very much hope that an additional session of the government will take place this week, where the allocation of funds will be decided," Aas said at a press conference on Thursday.
The economic affairs minister continued: "Nordica has found a niche and is offering strong competition with its presence. With this support, they can recover better and stronger."
Nordica has assessed that the company will lose out on €22 million due to the coronavirus pandemic wiping out much of the travel sector. The government's communication unit stated that the funding must be provided through the share capital.
Nordica management board chair Erki Urva said the package helps the company survive the crisis. "This (support package - ed.) will mostly go to pay off debts that have developed. Let's just say that the European Union would not have given a state aid permit to a company who was in trouble before the crisis. So we did very well, we had concrete hopes to finish this year with solid turnover," the airline chief said.
The revised business plan has given up on 12 direct flights from Tallinn. Urva said that there are still plans to fly from Tallinn, but the specific dates and times are not yet clear.
Urva said: "The current situation is that the number of travelers of Tallinn Airport has dropped by close to 90 percent and the latest capacity indicators are a bit over 30 percent, meaning that everyone who flys is burning money. I am not convinced if we should burn tax-payer money at this time."
Following the decision, Nordica and Kredex will negotiate a loan agreement. The state plans to provide €8 million in the form of a loan.
One of the conditions for granting state aid to Nordica is that the state must leave the company or recover the aid from the company within seven years. The Ministry of Economic Affairs and Communications (MEAC) does not currently have a plan to privatize Nordica.
Editor: Helen Wright