Nordica (EE, Tallinn Lennart Meri) may face bankruptcy by December, according to a summary of the request for state aid which the Estonian government sent to the European Commission earlier this year, as seen by Estonian broadcaster ERR.

The report assessed the market value of the company as of July 16, 2020, in which current cash flows cannot cover costs, as being minus EUR19,553,000 euros (USD22.7 million), a contrast from the company being nearly EUR18.9 million (USD22 million) in the black on December 31, 2019.

According to Nordica's own estimates, the company will lose EUR57 million (USD66.3 million) in revenue because of the coronavirus crisis between March and December this year, resulting in a EUR23 million (USD26.7 million) operating loss for the full year.

Nordica applied for a loan from the Estonian branch of Sweden's SEB Bank, which has a sizeable presence in the Baltics, in April but was refused, the report shows. SEB cited the stagnation in the aviation market, future uncertainty, and the fact that as a virtual carrier Nordica had no assets for use as collateral.

Nordica subsidiary Xfly (EE, Tallinn Lennart Meri) currently operates an all-leased fleet of six ATR72-600s, two CRJ700 Srs 701ERs, six CRJ900ERs, and six CRJ900LRs, according to the ch-aviation fleets advanced module.

The Estonian government told the European Commission that it was not possible for Nordica to obtain a loan from the private sector and the only solution was state aid, ERR reported. Without it, Nordica would cease operations before December, it warned.

Nevertheless, it assured that the airline's business model of leasing smaller aircraft while operating other airlines' routes for them was one that could weather the coronavirus storm.

Through Xfly, Nordica offers ACMI services to a number of carriers. However, LOT Polish Airlines (LO, Warsaw Chopin), which owns a 49% stake in Nordica alongside the Estonian state's 51%, terminated a contract that covered five aircraft in the early stages of the crisis, until at least until March 2021, on grounds of force majeure.

SAS Scandinavian Airlines (SK, Copenhagen Kastrup) has been contracted to operate 15 aircraft, but this was modified during the crisis so that only five of the aircraft are currently in operation.

As previously reported, the European Union approved, on August 11, EUR30 million (USD35 million) in state aid including a loan of EUR8 million (USD9.5 million) with “subsidised interest” and a share capital increase amounting to EUR22 million (USD25.5 million).

Toomas Peterson, a former head of the Estonian civil aviation authority (Lennuamet) and of Nordica predecessor Estonian Air (OV, Tallinn Lennart Meri), told ERR that in cold equity terms the flag carrier should shut down, but, given the trend worldwide for bailouts to national carriers, it should be kept alive as it could not be taken for granted that Latvian competitor and flag carrier airBaltic (BT, Riga) would continue to fly from all three Baltic capitals.