Estonian Air forced to update survival plan

Photo: Toomas Tatar / Postimees

According to Estonian Air CEO Jan Palmér, they are still on top of the restructuring plan presented to European Commission which, however, will have to be slightly tweaked due to recent events.

Last year’s loss proved larger than expected in the restructuring plan – by one million euros.

It is very important for us to fulfil the plan. As the state aid investigation started, we thought that the European Commission would decide during six months as that’s what the rules say. Thus, the plan reflected only six months’ interest rate regarding the state loan.

In case of a positive decision, it would no longer be a loan but an equity capital injection. But now that the decision has stalled we have had to pay interests the entire time. That’s basically the only reason why the loss is larger by a million.

Business operations went according to plan, more or less. In aviation, if you make a plan and fulfil it after a year – that’s no ordinary feat. This is a very volatile business. And that’s what we also presented to the European Commission, last week.

What was the feedback?

No feedback, actually. Rather, they just wanted to hear what exactly we had done. As we prepared the restructuring plan so long ago, then now we reached an agreement that before the end of June we would review the next years’ plan.

The changes concern the plane fleet i.e. which planes we should use after 2015, as then we would be able to return the Embraers. Also, we want to sell one plane.

How are you doing with Kiev flights?

We have cut amount of flights to Kiev to adjust to demand. The demand is still there, but is has shrunk somewhat. That’s a pity, of course, because if was a very good line for us, especially in summer. Nobody has an idea what will be happening there. We are just following the developments and adjusting to them.

What will you do with the two excess planes?

Since this March, one of these is in Birmingham where we have a contract with Air Charter Service which is finding charter flights for our plane. Over there, we’ve had quite good results.

The other plane we have used for charter flights in Tallinn, as well as at our regular flights. But from May 5^th that plane moved to Växjö, Sweden, where we have a contract with the local government; and the plane is making trips to Amsterdam.

While the Birmingham contract is riskier, then in Växjö we are more confident to make profit. Hopefully these contracts will last till the end of 2015.

Have you been reconciled with the new economy minister Urve Palo?

We met with her and she is a very enthusiastic person. She has supported us a lot. In the beginning there was a slight glitch, but I do understand where she stands.

One thing we discussed was the way that ministries and state enterprises are buying flight tickets, which is strange compared to some other countries. Sweden, for instance, supports SAS etc. It’s a state company and we should have their support, so they should make more use of our flights than they are currently doing. She understood that and hopefully we will see some change there.

How are the EU elections affecting the European Commission state aid decision-making process?

The people who work there are continuing with their cases. They may make their decision, but the new commissioner will need to approve it. We do not know who will get that role. Commissioners will not enter their offices before September or October. So the decision isn’t likely to come before end of the year.

Estonian Air’s board keeps shrinking – it’s only you left, and the finance director Wade Stokes. That enough?

It will not shrink more; I have too much on my plate already. But that was because as you are cutting, you have to cut everywhere to see if you can make a profit. I’m telling all employees that they must be multifunctional and cannot just do one thing. Same with me.

But we are lacking a commercial director. We have already picked a person, but the contract has not been signed yet so I can’t give the name.

An Estonian?

Yes. I have been fighting for that and there’s also been much talk about that in the council. I am a Swede and though Wade [Stokes] is married to an Estonian and speaks Estonian, he’s still an American. But thinking about the future, it is important to have an Estonian in the board.

How long are you planning to lead Estonian Air?

I have not decided yet. I have promised to be here until the state has found a solution for the airline. So that till the decision comes from the European Commission, and if anything still needs to be fixed after that, then I’ll do that as well.