However the same ministry has also decided to increase, rather than cut, remuneration to three board members of a related state-owned firm which leases aircraft to Nordica.

When last month the Ministry of Climate rejected offers from two companies to purchase the Nordic Aviation Group (NAG), it also pledged to review sale conditions and other circumstances over the next six months.

A month has passed without any significant developments in the process.

Sander Salmu, undersecretary for mobility at the Ministry of Climate, told ERR that Nordica is undertaking actions to meet goals set out in April to stabilize the company's operations and to achieve privatization.

"This means reducing costs in order to become self-sufficient, and negotiating existing contracts to improve their profitability. The aim of the state is to privatize aviation companies at the best possible market price, bearing in mind Nordica's complex situation," Salmu said.

Nordica's fate is directly linked to the state-owned Transpordi Varahaldus, which wet-leases aircraft to Nordica.

On Tuesday, Climate Minister Kristen Michal (Reform) signed a decision to extend the mandates of the board members of Transpordi Varahaldus and to hike their remuneration in respect of sitting on the board.

Board chair Maigi Pärnik-Pernik's remuneration rose from €500 to €700 per month as a result, while that paid to board members Ave Henberg and Raoul Lättemäe similarly increased, from €300 to €500 per month.

Salmu justified the decision by stating that as privatization looms for Transpordi Varahaldus, the board's role within the company has expanded.

LHV Fund Manager: Risks in aviation up the cost of capital

This week, Latvia's national carrier airBaltic announced that it had issued €340 million worth of five-year bonds at an interest rate of 14.5 percent.

This rate significantly exceeds the interest rate at which airBaltic had borrowed €200 million from the bond market five years ago, which stood at 6.75 percent.

ERR asked Romet Enok, a fund manager at LHV Asset Management, whether any conclusions could be drawn from this information on Nordica's privatization prospects.

Enok stressed the transaction was not comparable to a bank loan and so to do so would be comparing apples and oranges.

At the same time, he said: "We have not made any bond investments targeting less than a 10 percent yield from LHV funds for almost two years."

Enok noted that the additional risks seen in aviation also serve to increase the cost of capital.

"The positive interpretation is that a high-risk, low-rated local company was indeed able to secure a large amount of capital. No law of nature states that capital is always readily available, however," the fund manager remarked.

In early April, Minister Michal proposed the government not continue negotiations with the two companies which had made offers to buy NAG.

Michal said at the time that one offer was not financially sufficient, while the other incorporated additional conditions which the government found unacceptable, plus the bidder had not provided adequate information on the source of capital to be used in the financing.

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