Michal: No plan to pour additional resources into Nordica

Kristen Michal (Reform).
Kristen Michal (Reform). Source: Priit Mürk/ERR

Estonia's Minister of Climate Kristen Michal said that stabilizing Nordica may prove impossible. The minister does not plan to make additional funds available to the airline, which will have to turn its loss around under its own steam.

"While capable of offering subcontracting services abroad, the company plotted a course for expansion, took on new customers but ended up struggling to cater to existing ones for lack of credible buffers," he said.

"From there, bad luck and the economic situation also played a role. A few planes were damaged, spare parts did not arrive on time. There was poor crew location planning etc.," the minister suggested.

The expansion decision was made late last year when the company's outlook was positive, while things got complicated after that. Michal said that while the expansion may have looked like a good idea then, the company is unable to service its planned volumes for this summer. "The result now is a monthly deficit."

The minister said that the government expects Nordica to operate profitably. "The expectation is for the company's various decisions to be revised, their validity analyzed in today's context, and stability and hopefully profitability restored."

The crisis team to start work at Nordica will help determine which contracts can be made profitable and which should be terminated.

The climate minister said that last year's decisions are the responsibility of the company's management that perceived today's market situation as more hopeful than it is. Michal added that he has also spoken to then Economy Minister Riina Sikkut who said she was not involved in picking types of aircraft or the airline's plans for expansion. "The economy minister was not involved in day-to-day management. There are private sector specialists paid many times what the minister makes to handle the running of companies. Decisions are made by management boards and checked by supervisory boards of companies."

Michal said that the airline should be privatized anyway as subcontracting work outside of Estonia does not qualify it as a strategic service provider for Estonia. He added that it makes no sense to place additional sums in Nordica. "Rather, we should spend it on the airport that can help us create necessary air links for the Estonian people and economy," he said.

The minister suggested that Nordica's supervisory board also shares in the responsibility. "But they are the ones trying to keep the company going today, and if we see the opportunity or need to bring someone else on board, we will do so."

Nordica must sort out its current difficult situation for privatization to go ahead, Michal remarked.

"[Aviation assets managers] Transpordi Varahaldus is still a very good candidate for privatization. Nordica will be too if it can get its financials in order. We will weigh our options should the latter prove very difficult. I admit that it may prove impossible if the company has assumed unfeasible obligations. Then we will simply have to privatize the assets side of it."

Michal suggested it is unlikely Nordica will be given additional resources during a period of public sector austerity, meaning that it will have to look to its own devices. "I have no plan to divert additional taxpayer money to Nordica."


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Editor: Marcus Turovski

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