Nordica and LOT amend ownership structure

Following lengthy negotiations, Estonia’s national airline Nordic Aviation Group (Nordica) and the Polish national carrier LOT Polish Airlines have reached an agreement on amending the ownership structure of their joint subsidiary Xfly (previously Regional Jet). According to the contract they have entered into, Nordica will purchase LOT’s 49% share in Xfly, after which Nordica will become Xfly’s sole owner. Commercial cooperation between Nordica and LOT will continue.

Chairman of the Management Board of Nordica Erki Urva says that the long negotiations to buy out LOT’s 49% share have now come to an end and that the resulting contract has been signed by both parties. “Although the negotiations went on for a very long time, I’m really happy with the agreement we’ve reached,” he explained. “It’s also important that in ‘breaking up’, as it were, we’ve managed to stay friends, which ensures that our commercial cooperation will continue. All this means that Estonia’s national airline is now the 100% owner of Xfly, which operates as a capacity provider, giving us the freedom to make quick decisions ourselves if we need to – which is vital considering how much the coronavirus crisis has shaken up the aviation market.”

Mr. Rafał Milczarski, CEO & President of the Management Board of LOT Polish Airlines added: „I would like to thank Nordica for four years of mutually beneficial cooperation. In recent years, LOT has strengthened the offer of European connections from Tallinn and built high brand recognition of the Polish airline in the Baltic countries. During this time, LOT and Nordica crews made 63 658 flights together. As a result of the pandemic and significantly reduced demand for air connections, today we are completing this special journey. Bearing in mind the good relations between our companies, we will continue to cooperate on a commercial basis.”

Poland’s national carrier LOT acquired a 49% share in Nordica’s subsidiary Xfly in November 2016. The two airlines then started working together at a variety of levels, including sharing a ticket sales platform and operating flights, first between Tallinn and Warsaw and later on other routes. The Estonian and Polish carriers outsourced flight operation services from Xfly, which has since gone on to become the biggest Estonian airline – a perfect example of successful cooperation between two countries on the European aviation market.

Both Nordica and LOT had big plans for Xfly, but the global pandemic saw the airlines’ operations all but grind to a halt overnight and they were forced to focus instead on simply staying alive. While LOT and Nordica are continuing to cooperate commercially, the decision was taken to place Xfly in majority ownership to ensure the subsidiary’s long-term future. As such, LOT is exiting the circle of owners of the airline, of which Nordica will now become the sole owner.

On 11 August 2020 the European Commission approved the provision of state aid to the Nordica group, to which Xfly belongs. This aid constitutes one-off support in response to the emergency and covers the losses incurred by the airline due to the coronavirus crisis. The aid package, valued at 30 million euros, was approved in turn by the Estonian government during a cabinet meeting on 15 October 2020, as a result of which the country guaranteed its strategic ability to restore flight connections to key destinations once the pandemic has ended.