Estonian Air Folds Following EC Decision
- New Europe Investor
- November 09, 2015
The European Commission has ruled that aid given to Estonian Air was illegal and as the airline is technically bankrupt, it had to fold with immediate affect.
The Commission ruled on the weekend that €90 million given to the company by the Estonian government gave it a an unfair advantage over its competitors.
The commissioner in charge of competition policy said following the decision, “companies should compete based on a sustainable business model rather than relying on continued support by the State to stay in the market. Estonian Air has repeatedly received public subsidies over the past five years but did not carry out the necessary restructuring to become viable as a business. It would not be a good use of taxpayer money to keep Estonian Air in the market artificially, nor would it be fair to competitors, which have to compete without such support.”
The investigation into the airline by the European Commission began in 2013 with the Estonian government eagerly awaiting a decision ever since.
The government, foreseeing the negative outcome, recently set up Nordic Aviation Group to manage Estonian Air’s routes. Another company, Transpordi Varahaldus, will take on the lease contracts.
In reaction to the news, Estonian MEP and former Foreign Minister, Urmas Paet, said the decision to shut the airline down was a mistake. He claimed that the bailing out of Estonian Air was not hurting any other airline. and should therefore be appealed in the courts.
Estonian Air became a symbol of the country’s independence in the early 1990s. However, it had not earned a profit since 2005, with numerous bailouts and restructures failing to turn it around.
In recent years, the airline served approximately 500,000 passengers annually, and employed around 200 people.