Airport, Estonia, Transport

International Internet Magazine. Baltic States news & analytics Thursday, 28.03.2024, 13:07

Estonia: Nordica to end 2020 with EUR 23 mln operating loss

BC, Tallinn, 28.09.2020.Print version
State-owned Estonian airline Nordica may be facing bankruptcy by year-end unless it receives state aid, as it is about to finish this year with an operating loss of 23 mln euros, it appears from European Commission documents on potential state aid for the carrier, obtained by public broadcaster ERR cites LETA/BNS.

The airline is in negative equity and owns no planes of its own. The Estonian government assessed Nordica's equity at minus 19,553,000 euros as at July 16, and Nordica itself estimates it will have lost 57 mln euros in potential revenues due to the pandemic, with a negative cashflow of 23 mln euros.


Nordica was refused a loan by Swedish-owned SEB in April, with the latter citing uncertainty. The airline does not own any planes of its own, which could be used as collateral.

According to the Estonian government, it is not possible for Nordica to get a loan from the private sector under the conditions of the crisis affecting the aviation sector. Hence, the only way out is state aid, as without state aid the airline would go out of business, and the company's sustainability would be in jeopardy already before December 2020. 


Nordica currently is a provider of the aircraft, crew, maintenance and insurance (ACMI) service to other airlines, and has signed agreements on the provision of ACMI with SAS and Polish carrier LOT. With LOT it used to have an agreement concerning five aircraft, which the Polish carrier has suspended until at least March 2021 citing a force majeure. 


Nordica's agreement with SAS, which was concluded for 15 planes, has been downsized to five aircraft following the outbreak of the coronavirus crisis. 


Nordica has still had to pay for its aircraft leases as well as employees -- either those kept on or those receiving redundancy packages, the English-language new portal of ERR said.

In 2019, before the pandemic broke, Nordica had a turnover reported at 100 mln euros and paid 15 mln euros to state coffers in taxes, including 1.9 mln euros in labor tax. Nordica is the biggest company in the Estonian aviation sector. The sector itself is estimated to account for 3.5% of the country's gross domestic product (GDP).


Before the coronavirus crisis, the company employed a workforce of 624, and its salary levels are from 1.5 to four times higher than the national average. By the end of this year, the number of employees at Nordica is estimated to drop to 385.


Nordica also supports, by its operations, the work of Transpordi Varahaldus OU, which leases aircraft for the firm, Tallinn Airport, aircraft maintenance provider Magnetic MRO, and Airo Catering Estonia. Nordica also is an important cooperation partner for the Estonian Aviation Academy, whose graduates account for about one in five Nordica employees. 


The European Commission noted that air connections even before the coronavirus pandemic struck were below European average in Estonia, partly due to the country's location and size, with Nordica, which was founded in 2015, having a 20% share of routes operated from Tallinn before the crisis. Those flights were operated not under the Nordica brand, but via the ACMI arrangement. Flying under its own brand, Nordica still had a 40% share of routes out of Tallinn in the first half of 2019.  


The European Commission agrees with the estimate that the cessation of operations by Nordica  means that it will take at least six to 12 months before other operators can substitute for the discontinued operations. That would mean Estonia being relegated further into the periphery of the EU that is difficult to reach by plane.


The document also points out that the types of aircraft leased by Nordica are suited specifically for serving an airport with small passenger numbers like Tallinn.






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