TALLINN – The Estonian government at a Cabinet meeting gave approval to the Ministry of Economic Affairs and Communications to start preparations for the creation of a new aviation group that will combine Nordica, Regional Jet and Transpordi Varahaldus under one roof; in the long run, this creates a precondition for the privatization of the emerging group.
The government's vision is to bring the Nordic Aviation Group, Transpordi Varahaldus and Regional Jet under one umbrella organization, making the companies independent of each other in terms of business activity.
"We have three strong aviation companies, for the growth of which it is reasonable to release Regional Jet from the status of a subsidiary of Nordica," Minister of Economic Affairs and Infrastructure Taavi Aas said in a press release.
"This will ensure that there are two companies operating on an equal footing, which will enable them to participate in subcontracting independently and grow the aviation business. This will also create the preconditions for selling the companies' stakes in the future," he added.
"The management of Nordica, its subsidiary and Transpordi Varahaldus as independent entities has proved successful, but there are duplications in the group, which we can eliminate and create a greater benefit effect," Aas said.
Nordica currently has two wholly owned subsidiaries -- Regional Jet OU and Nordic Aviation Advisory OU.
In addition to the chain of command, Nordica is closely involved with Regional Jet in its day-to-day business. Nordica provides aircraft leasing and management support services to its subsidiary Regional Jet. For example, IT, human resources, law and financial services units are located within the parent company.
Transpordi Varahaldus OU is an asset management company that offers Nordica and Regional Jet aircraft leasing services and aircraft spare parts and components on a daily basis.
Lennunduse Grupp OU -- this is a conditional business name until the new business name is chosen -- would be the sole shareholder of Nordica, including Nordic Aviation Advisory, Regional Jet and Transpordi Varahaldus, that is a new state-owned parent company would be created as a result of the reorganization.
As a result of the reorganization, all support and management functions currently provided by Nordica will be transferred to the new holding company.
Nordic Aviation Advisory OU currently has no economic activity and after the establishment of the aviation group there will be no need for a separate company.
"In aviation, it is customary to keep business lines and supporting activities separate for risk management, and thus the business, operational and asset management functions of the new group will be maintained in separate companies, but more structurally under the management of the parent company," Aas said.
Before establishing the group, the ministry will consult with the European Commission on state aid risk mitigation. Following consultations with the European Commission, preparations will be launched for the creation of a new holding company and the formation of an aviation group.