SAS recovers properties in asset shuffle

  • 2009-08-12
  • From wire reports

TALLINN - Scandinavian Airlines' (SAS) subsidiary, Air Maintenance Estonia, has taken over ownership of an office building and a hangar next to Tallinn airport that was previously owned by Estonian Air, in a possible move to place Estonian Air into bankruptcy, reports news agency LETA. The move has caused some controversy, as the surprise deal reportedly met with opposition from the Estonian government.

The asset transfer occurred as a result of a July 27 meeting by Estonian Air's supervisory board, as they decided that SAS, which owns 49 percent of the Estonian airline, would acquire the properties.
This decision came unexpectedly for the Estonian government, which owns 34 percent of the enterprise. Estonian government officials Tarmo Porgand and Heldur Meerits voted against the proposal in the meeting. Their explanations were that the substance of the transaction was unclear, the arguments insufficient and the decision contrary to Estonian Air's interests.

The management board of Estonian Air, however, reported that talk as if SAS is taking assets out of the Estonian airline is clearly exaggerated, that lowering the value of the airline would not be in the interests of its owners, namely, SAS. "SAS has issued short-term loans to Estonian Air in order to efficiently manage with the effects of the economic decline on the aviation market," said the management board of Estonian Air. The board added that the airline is preparing to update its fleet in the near future, and that it has implemented several decisions that will guarantee the company's flexibility.

"SAS has fully supported Estonian Air during the difficult times and it is certainly not in the interests of the owner to damage in any way the company's operations, or to devalue its worth," added the board. "The management board of Estonian Air has discussed different alternatives to pay back the short-term loans to SAS; to that purpose, the management board of the Estonian enterprise also inquired about the option of selling its real estate, and clearly the best offer came from Air Maintenance Estonia," it asserted.

Estonian Air estimated that the planned transaction is favorable for the enterprise in the context of the overall weak state of the market and it will maintain the option of buying back the real estate, if it so wishes. According to the board, the enterprise has managed to satisfactorily adjust to the situation on the aviation market and will continue everyday operations and servicing of customers.
The airline is jointly owned by the Estonian state, SAS Group and investment bank AS Cresco. Latest available figures show 2007 revenue at 1.38 billion kroons (88.4 million euros) with a loss of 52 million kroons. The airline carried 745,730 passengers.