Estonia must abandon any illusions about the realities of having a national airline, Minister of Infrastructure Vladimir Svet (SDE) said Wednesday, following the announcement that Nordica is entering bankruptcy proceedings.
The state of Estonia does not need a major firm which fails to fulfill its strategic objectives, Svet added, and aviation efforts should focus on developing Tallinn Airport.
Speaking at a press conference addressing the bankruptcy, Svet said that while Nordica’s stated aims on being founded were to be a profitable airline flying to and from Tallinn: “Ultimately, up to this day, Nordica has not achieved any of these objectives.”
“I hope future governments won’t flirt with the idea of trying again,” Svet added.
“The government’s goal has been clear – we will not be injecting any additional funds into Nordica. There was no other choice but to declare Nordica bankrupt,” Svet added. The state had invested approximately €70 million into Nordica in total, during the nine years of its existence.
Svet emphasized that the recent effort to privatize Nordica was the correct decision at the time. However, the airline’s financial situation under its previous management had complicated efforts to sell it off, he added.
He said: “At one point, there was scope for Nordica to be privatized. Unfortunately, Nordica’s main contract – the high-profile SAS contract, unexpectedly terminated this fall – was structured in such a way that it left little options for Nordica to either weather this winter on its own or to appear attractive to potential investors.”
The decision to privatize had been made under current Prime Minister Kristen Michal’s (Reform) tenure as Minister of Economic Affairs and Infrastructure, 2015-2016.
Also appearing at the press conference was Deputy Secretary General at the Ministry of Climate, Sander Salmu, who said the state initially invested €40.2 million to launch the airline at its inception.
The state then provided €22 million in aid plus €8 million in credit during the pandemic, using €7.5 million of that in the event. This totaled €70 million in support, with no additional subsidies. Any claims that it was further subsidized beyond that are untrue, Salmu added.
Salmu noted that ever since Nordica stopped flying from Tallinn in 2019, it has failed to meet its objectives.
In the course of the privatization efforts, nine companies showed interest, with three making initial non-binding offers. Two potential buyers sought the entire aviation group (Nordica, Xfly, and Transpordi Varahaldus together), while one focused on Nordica alone.
One bidder proposed taking over the company at no cost, while a German firm offered €27 million for Nordica and Transpordi Varahaldus together. However, the state rejected this latter offer due to concerns over undisclosed beneficiaries and funding sources.
According to Svet, the only correct strategy is to support and develop Tallinn Airport, whose parent company operates some of the regional airports in Estonia too. He noted that if any revenue is still there to be wrung from the aviation sector in Estonia, it should be directed toward the airport.
Svet had some nicer words for the final management team at Nordica, who had managed to stabilize the airline’s condition “to the extent that this summer was even profitable for Nordica,” he said.
Nordica’s bankruptcy doesn’t mark the end for the group, as its conclusion hinges on selling Transpordi Varahaldus’s aircraft, with further steps to be presented to the government on Thursday. Transpordi Varahaldus’s aircraft, purchased through LHV leasing, will be sold to cover obligations and minimize losses, after which the company will cease to exist as a state-owned entity.
State-owned airline Nordica is set to close and file for bankruptcy after investor Lars Thuesen backed out of a deal earlier this week, the company confirmed on Wednesday.
The company had provided internal domestic flights in Sweden, under the Regional Jet brand, until the SAS agreement was terminated in the autumn.
The Republic of Estonia owns Nordic Aviation Group and its subsidiary Xfly, which ceased operating under the Nordica name in 2019 and has since focused on outsourcing services, including wet-leasing aircraft.
The company was founded in 2015, on November 8 – the very same day Estonian Air, the previous national carrier, had been wound up. Estonian Air had fallen foul of European Commission regulations on state aid which would have meant the airline having to pay back over €85 million. Instead, it entered liquidation.
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