A Ministry of Climate memo made public on Tuesday, states Nordica's insolvency cannot be ruled out. The company posted a loss of €11.9 million this year.

When the airline was founded there were two agreements, the minister told ERR. Firstly, Nordica must fly to and from Tallinn – which it no longer does. Secondly, it must be able to finance itself – which does not seem to be the case now.

"In this way, it is not actually fulfilling the task agreed when it was set up. It is not a strategic carrier for Estonia. We pay tens and tens of millions of euros every year for public transport in Estonia. So we are certainly not going to put taxpayers' money into the fact that an airline is providing transport in other countries, especially at a time of cutbacks," he said.

Selling the airline has not been ruled out, Michal said. He highlighted the company's board and temporary crisis management team have managed to slow its losses, but not completely.

"We have also now asked the government, together with the Ministry of Finance, for a mandate to privatize Nordica, either in part or as a whole, either alone or together with Transpordi Varahaldus, so I wouldn't draw a complete line under that plan. I would wait to see how they do and if there are assets and there are interested parties – because there has been interest in this company recently – to privatize, then we will still try to privatize it. If that fails, then the company will either have to continue on its own or it will go the way of the perishable," stated Michal.

He said the company's situation is very difficult and the root cause seems to be an unsuccessful expansion plan.

"The board and the management have a very big challenge to save it, it may fail. So in that sense, it is worth lowering expectations as much as possible and indeed saying that this is an extremely critical situation," the minister added.

Asked if it would make sense to file for bankruptcy to avoid further losses, Michal said the board still believes it can stabilize the company. But the situation will become clearer in the coming months and agreements need to be reached with customers.

"This, in fact, is likely to determine the future fate of this company," Michal said, adding that by December, or at least by the end of the year, Nordica's fate will be known.

He reemphasized that expectations should be kept low, as the situation is not good.

OÜ Transpordi Varahaldus, from which Nordica leases its aviation assets, also experiences losses when the airline does not perform well, Michal said. It is an independent company but its assets could be sold in the futrue.

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