State to amalgamate Nordica, Regional Jet, TVH into one holding company

A Nordica plane at Tallinn Airport.
A Nordica plane at Tallinn Airport. Source: Ken Mürk/ERR

The state plans to consolidate its three aviation firms into one holding organization, a move which would rationalize operations and reduce inefficiencies, it is argued, and even potentially pave the way to a privatization in the future. The move would also, perhaps paradoxically, make the three companies more independent of each other in business terms.

The three companies, airline Nordica, Nordica subsidiary Regional Jet, which operates wet-leasing agreements on several routes including domestic lines in Sweden, and Transpordi Varahaldus (TVH), a maintenance company, are the three companies in question.

Economic affairs and communications minister Taavi Aas (Center) said that: "We have three strong airlines whose growth makes sense to release Regional Jet Nordica from its subsidiary status. This will ensure the existence of two companies operating on an equal footing, which will allow each other to outsource and grow the aviation business. This will create the preconditions for privatization in the future."

"The management of Nordica, its subsidiary [Regional Jet] and TVH as independent entities has proved successful, but there is some duplication within the group, which we can eliminate and create a greater net profit," the minister continued.

This would not only allow the new, amalgamated company to expand its business, but would also be a prerequisite for any future privatization.

Aas added that there would still be separate firms under one umbrella, in the new set-up.

He said: "In aviation, it is customary to keep business lines and supporting activities separate for risk management, and therefore the business, operations and asset management functions of the new group will still be maintained as separate companies, but more structurally under the management of the parent company."

The ministry also has to with the European Commission to mitigate state aid risks, before it can prepare to set up the new holding company.

The restructuring would mean all support and management functions currently provided by Nordica will be transferred to the new holding company.

Nordica is closely involved in the day-to-day business of Regional Jet, ERR reports, in its aircraft leasing services and management support services. Nordica has another subsidiary, Nordic Aviation Advisory.

TVH serves both companies with aircraft leasing services and aircraft spare parts and components, on a daily basis.

Nordica was founded in 2015 from the ashes of the defunct Estonian Air. The former national carrier had to fold after the European Commission deemed a multi-million domestic support package it had been granted constituted illegal state aid, ordering it to pay back €85 million, effectively bankrupting the airline in one fell swoop.

The company, as with the entire aviation sector worldwide has been hit hard by the pandemic, and was given a €30-million loan in response to this, approved by the government just over a year ago. That deal did not fall foul of the European Commission.

Polish airline LOT had had a 49-percent stake in Regional Jet, which the state aimed to buy back starting last year and becoming reality this summer.

Regional Jet was rebranded as XFly last year though the Regional Jet firm remained intact.


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Editor: Andrew Whyte

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