Payment of Nordica employee compensations awaits bankruptcy declaration

Nordica's bankruptcy filing has led to the dismissal of over 270 employees. Severance and unpaid wages are pending, with compensation only possible after the bankruptcy is officially declared by a court.
Following Nordica's bankruptcy filing, the airline and its associated companies announced the dismissal of 272 staff members.
Severance payments have been made to one-third of these, while bankruptcy compensation – such as unpaid wages, vacation pay, and others – can only be paid out by the Unemployment Insurance Fund (Töötukassa) after the companies' bankruptcies are officially declared.
Nordica announced its bankruptcy filing on November 20 last year.
In connection with this, Nordica and its associated companies informed the 272 employees of their dismissals.
According to the layoff notice, subsidiary Regional Jet is dismissing 161 employees due to bankruptcy, while Nordic Aviation Group, the parent company, is letting go of 15 people.
Sander Salmu, deputy secretary general for mobility at the Ministry of Climate and also a board member of Nordica, said wages at Nordica and Xfly have always been paid on time despite financial difficulties.
Salmu stressed that once insolvency has been declared, however, the management board is prohibited from making payments, including salaries.
"Thus, all creditors, including employees, get treated equally," he said.
Nordica currently still employs a remaining 42 people, managing its aircraft, assets, and providing support services.
"The rest of the staff have been laid off, and contracts with rental companies have also been terminated," Salmu noted.
A significant portion of flight personnel worked for staffing agencies, which are now awaiting the bankruptcy declarations.
Salmu said the use of staffing agencies is standard in aviation, arguing it provides flexibility across Europe.
"A large proportion of Nordica's employees were directly employed; staffing agencies mainly provided maintenance technicians, flight attendants, and pilots," Salmu went on.
Companies owned by British-Swiss aviation businessman Phillip Ashley-Smith — namely Nordic Crew Management, Vanguard Aviation Estonia, and The Estonian Crew Company — are laying off 89 employees, while Best Crew is dismissing seven more.
Lauri Kool, communications adviser for the Unemployment Insurance Fund, said only a few of the affected individuals have so far registered with the agency as being unemployed.
"Laid-off employees still have time to register, but many have likely moved to new jobs already," Kool explained.
A total of three Regional Jet employees and seven Nordic Aviation Group employees have registered as unemployed.
Benefits to ex-employees depend on factors like length of service and the company's financial condition, given the court has not yet declared bankruptcy for Nordica or its related companies.
Without a bankruptcy declaration, neither employees nor the trustee can file claims for insolvency compensation in any case.
Severance pay comes to one month's mean wage for employees with indefinite contracts, with those working five or more years eligible for compensation from the Unemployment Insurance Fund.
Of the 272 laid-off employees, 89 have so far received insurance benefits.
"For severance payments, the employer must submit a claim to the Unemployment Insurance Fund," Kool added.
"If the employer has not done so, the employee can also file the claim themselves," he continued.
When a company is declared bankrupt, unpaid wages are paid by the Unemployment Insurance Fund.
"But we can only do that once the bankruptcy is finalized," Kool noted.
The first-tier Harju County Court will hear Nordica's bankruptcy filing on January 27, and Vanguard Aviation Estonia's filing on the same day.
Nordic Crew Management's bankruptcy filing will be heard on February 18.
Nordica itself filed for bankruptcy late last year, ending speculation on the airline's future following a failed attempt to float it via an IPO.
Nordica was founded in 2015, one day after the winding-up of Estonian Air.
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Editor: Andrew Whyte