LOT set to exit Estonia's Xfly in late 4Q20

Estonia’s state-owned flag carrier Nordica (ND, Tallinn Lennart Meri) will “terminate” LOT Polish Airlines’ 49% ownership in its ACMI/charter subsidiary Xfly (Estonia) (EE, Tallinn Lennart Meri) by the end of November, chief executive Erki Urva has told Estonian broadcaster ERR.

Nordica had to bring the external shareholding to an end in order to qualify for EUR30 million euros (USD35.5 million) in state aid. As previously reported, the Estonian government agreed in October to approve the increase in the carrier’s share capital together with the full renationalisation of the airline.

“We have an agreement in place to terminate it in late November. The text of the contracts has been agreed on,” Urva said.

Tallinn wants all of Nordica’s subsidiaries to be owned exclusively by Nordica. An additional subsidiary, Transpordi Varahaldus - a lessor financed by privately-owned banks which owns four of the Xfly's CRJ900ERs and three of its CRJ900LRs - will soon merge with Nordica.

According to the ch-aviation fleets module, Xfly currently also leases two more of each aircraft type plus two CRJ700 Srs 701ERs, and eight ATR72-600s.

“As for Transpordi Varahaldus, we need permission from banks to merge the companies as loans and bonds are in that company. [...] That is what we will be working on in the near future. If all goes well, I believe we can move closer to merging the companies,” said Toomas Tiivel, chairman of Nordica’s supervisory board.

The Estonian Civil Aviation Administration has issued Nordica with an Air Operator’s Certificate (AOC) as a single-aircraft airline, which will allow it to apply for its own airline code instead of using LOT’s, Urva said.

“We plan to use that aircraft for publically procured routes. Once we have the code, we hope to have a commercial platform of our own early next year. [...] We have not yet secured a licence from the Ministry of Economic Affairs and Communications, but once that comes in we can say that Nordica is no longer a travel agent but an airline,” he said.

Urva estimated that Nordica’s losses would increase from EUR3.8 million (USD4.5 million) in 2019 to about EUR20 million (USD23.7 million) in 2020. The loss, which the chief executive described as “not that great,” will be covered by the European Commission-approved state aid.