Estonian state not a ‘capable’ airline owner and should sell carrier Nordica: audit office

Estonia’s government is not sufficiently capable of acting as the owner of complex aviation businesses, the country’s national auditor has concluded after a review of regional operator Nordica’s business. The national audit office, Riigikontroll, says the government is too indecisive, adding that a sale of Nordica and the associated aircraft lessor Transpordi Varahaldus would be a “reasonable” course of action. Both companies emerged in 2015 as the government sought to establish a successor to collapsed flag-carrier Estonian Air, and Nordica – originally Nordic Aviation Group – started flying in early 2016. Riigikontroll’s review sought to determine whether the carrier and lessor had succeeded in achieving targets over their seven years of operation, and whether the government’s continued ownership was justified. But it has found neither company is “strategically necessary” for the state and there is “no understandable public interest” in owing them. “The dream of flying under one’s own flag might not be possible in the tight competition of the aviation market without continuous financial support from the state – and without violating the European Union rules for granting state aid,” says auditor general Janar Holm. Estonia’s government invested E72.7m to set up the two companies in order to ensure air transport continuity. But the state-driven strategy of operating from Tallinn proved an “economic dead-end”, says the auditor. The airline’s management had sought other avenues of income to cover the losses of flying from Tallinn, including wet-leasing aircraft to other carriers, and repeatedly informed the supervisory board of the difficulties of meeting the owner’s expectations. Nordica had been allocated E40.7m of the government’s funding but, by the end of its first year in 2016, it had generated a E15m loss and just E3.2m of the funding remained.<br/>