Court rules Nordica is successor to Estonian Air, inherits its debts

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A turboprop aircraft in Nordica livery. Source: Anna Zvereva/Creative Commons

State airline Nordica has been recognized as a legal successor to the now-defunct Estonian Air, a recent court ruling states. This means that, among other things, Nordica must both foot the bill of unpaid staff wages and return state aid granted to Estonian Air and now ruled as illegal. However, while this aid was ruled illegal by the European Commission, the Estonian state itself would need to decide whether to claim.

The second tier Tallinn Circuit Court ruled that Estonian Air, which was wound up six years ago, has a legal successor in Nordica and sister company Transpordi Varahaldus, and as such owes €1.5 million to former employees, while outstanding creditors can file claims with the courts as well.

However, the state has yet to formulate a stance on the issue.

Nordica CEO Erki Urva says that the €1.5 million owed to former staff could be met without major problems, while, Urva said, the state does not plan to claim the aid it granted back.

As reported by ERR news, the same court on March 27 rejected Nordica's appeal over the outstanding employee wages.

The relevant government minister, Taavi Aas (Center) said that a meeting with lawyers would be needed ahead of any major decision on the issue.

Aas said: "We are having a meeting with lawyers on Thursday to discuss what options there are. At the time Nordica was set up, the EU was consulted, and there was no question of legitimacy at the time. Then again, I think it is better to provide more detailed comments then, after the meeting with lawyers has been held."

Sworn attorney Kalle-Kaspar Sepper, representing the former employees, said that the state had been Estonia's largest creditor in the original state aid, which totaled €85 million, and which the European Commission ruled breached EU law – a ruling which prompted the airline's wind-up in late 2015.

Other creditors included the Tax and Customs Board (MTA) and private sector firms, which brings the total debt beyond the €100-million mark, he said.

"When a general legality has been established, then a legal situation has emerged where Estonian Air does not appear to have been wound up as a company, but simply continued under other names, and was then given more money. But this is my speculation," Sepper added.

The "more money" Sepper was referring to is likely to be the €30 million in state aid Nordica received last year.

Nordica's model makes much heavier use of wet-leasing and other agreements whereby it operates other airlines' routes for them (such as domestic routes in Sweden).

Nordica started operations a day after Estonian Air ceased, while the number and location of destinations the two airlines offered were roughly comparable, in pre-coronavirus days.

The aid it received was primarily issued in response to the coronavirus pandemic and the effects it and the accompanying travel restrictions had on the sector. It obtained European Commission approval.

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Editor: Andrew Whyte

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