Estonian government and SAS battle for national carrier

  • 2008-12-03
  • By Matt Withers

VYING FOR POSITION: The Estonian government and Scandinavian airline giant SAS both said that they would like to buy a majority share in the national air carrier.

TALLINN - As the push to inject funds into floundering national carrier Estonian Air tightens, both the Estonian government and SAS have announced a desire to buy out the other's stake and become the majority shareholder.
On Thursday Nov. 27 Prime Minister Andrus Ansip announced that Scandinavian Airlines (SAS) had sent a letter to the Estonian government stating that, due to Estonian Air's current liquidity crisis, a cash injection was needed imminently to ensure the airline's survival.
In the letter SAS said they would produce the needed funding, but only if the government would relinquish its share of the company.

Ansip responded by saying there are several solutions to the issue, one of which would be the government buying back SAS's 49 percent holding in the company. However, he did warn that those hoping for Estonian Air to remain in Estonian hands should not get their hopes up, adding that the government was open for negotiation with SAS.
"I would like to lessen the expectations of those people who believe that the Estonian government should in principle buy or increase its holding in Estonian Air," Ansip said during the press conference.
"We will certainly answer the letter from SAS. The contents of the letter will be that we are open for negotiations," he added.

Meanwhile, Estonian business paper Aripaev has reported that the Estonian Ministry of Economy is in negotiations with the ferry giant Tallink over the purchase of Estonian Air should the government secure SAS's share.
Aripaev said that an unnamed source confirmed speculation that Economy Minister Juhan Parts 's who is vocally opposed to selling the government's investment to SAS 's has on several occasions met with Ain Hanschmidt and Enn Pant, two of Tallink's wealthiest and most influential owners, about the potential deal. 
In supporting this claim, Andres Hunt, deputy chairman of the board at Tallink, said that an offer about the potential acquisition of a majority claim in Estonian Air had reached individuals connected with the company.
Yet the takeover remains an uncertain prospect, as Tallink's spokesperson Janek Stalmeister told The Baltic Times. "Contrary to speculations in the media, AS Tallink Grupp is not in negotiations to acquire any holding in Estonian Air," he said.

The current situation has arisen from Estonian Air's imminent need of a cash injection to buy new aircraft and instigate a new locally orientated business strategy, and the ensuing reluctance from the airline's three owners to provide the capital without a greater say in the carrier's future direction.
At present the Estonian state owns a 34 percent slice of the company, while SAS is currently the largest shareholder with 49 percent. If either party succeeds in procuring the other's holdings they will have an 83 percent majority ownership, with the remaining 17 percent attributed to the investment company Cresco.
Holding a majority stake in the company would enable either party to take direct control over the airline's future direction and smooth over any qualms about making the required cash injection.

In the meantime, Estonian Air remains unfazed about takeover speculations and will continue its scheduled flights and proceed with their current business plan.
"Only the owners of the company can comment the takeover issues. Estonian Air continues its activities and is operating flights as scheduled," Ilona Eskelinen, Estonian Air's spokesperson, told The Baltic Times.