Tallinn Circuit Court has legally recognised Nordica (ND, Tallinn Lennart Meri) as the successor to Estonian Air - and must settle unpaid staff wages and return state aid that had been granted to the defunct flag carrier and was ruled as illegal, the Estonian broadcaster ERR has reported.

The second-tier court found on March 31 that Estonian Air, which ceased operations in November 2015, has a legal successor in state-owned Nordica, a company legally incorporated as Nordic Aviation Group that took on the role as Estonia’s flag carrier when it was launched that same month.

The virtual carrier owns the ACMI/charter subsidiary Xfly (EE, Tallinn Lennart Meri) as well as Transpordi Varahaldus, a lessor financed by privately-owned banks which owns some of Xfly’s fleet, though there are plans to merge the lessor with Nordica.

The court ruled that the company owes the outstanding wages to Estonian Air’s former employees, estimated at EUR1.5 million euros (USD1.77 million), and that other outstanding creditors could also file claims with the courts.

While Estonia’s government has not yet expressed an opinion on the issue, only promising further meetings before making any major decisions, Nordica CEO Erki Urva commented that the money owed to former staff could be paid but added that the state had no plans to reclaim the aid it granted to Estonian Air. On March 27, the same court had rejected Nordica’s appeal over the outstanding salaries.

The European Commission ruled in November 2015 that the original state aid, which totalled EUR85 million (USD95 million at the time) “plus interest”, breached EU law, a ruling that prompted the airline to be wound up. Nordica started operations one day after Estonian Air ceased and eventually relaunched many of its destinations.

According to lawyers, other creditors besides the state included Estonia’s Tax and Customs Board and several firms in the private sector, taking the total debt over the EUR100 million (USD117 million) mark.

In related news, Ryanair (FR, Dublin Int'l) has challenged the European Commission’s decision last year to allow Covid-era state aid to Nordica. In a “position on Estonia’s intervention” in Case T-769/20 (Ryanair v European Commission) posted on the Estonian government’s website on March 31, Foreign Minister Eva-Maria Liimets said that Ryanair had put forward four pleas, the most important of which was that the commission had misapplied EU state aid rules.

“Estonia wishes to intervene and support the commission in Case T-769/20, as it is important for Estonia that the General Court [of the European Union] does not annul the commission’s decision to grant state aid. The state, as the owner, decided to support Nordica because it is an important company for the state, whose operations and liquidity were severely disrupted economically due to the virus,” the minister said.