Estonia prepares to set up new national airline

TALLINN — Estonia is ready to create a new airline should the European Union rule that the existing national flag carrier illegally received state aid, a decision that would put it out of business.

Economics Ministry spokesman Mihkel Loide said yesterday that 40.7 million euros ($46 million) have already been earmarked as an initial capital for a new, fully state-owned carrier. Under the plan, domestic and foreign investors would be allowed at a later stage.

Set up in 1991 when the Baltic nation regained its independence, Estonian Air has been loss-making for a substantial part of its history. In 2014, the carrier posted an operating loss of 6.7 million euros on revenue of 69.9 million euros.

Since 2009, Estonia has injected nearly 60 million euros of capital into Estonian Air to keep it flying. It carried 404,000 passengers in the first eight months of 2015 and has a fleet of five planes.

The EU's executive Commission is expected to rule later this year or early 2016 on whether the state aid was illegal and distorted fair competition.

Should the Commission decide not to demand that the government's capital injections be paid back, the new airline would be created anyway and merged with the existing Estonian Air, Loide said.

Investment company Infortar — the main owner of Tallinn-based ferry operator Tallink Grupp — had said earlier it was willing to acquire Estonian Air on certain conditions. It also has said it could consider investing in the new airline.