Current crisis forces postponement as airline is hit with hefty insurance costs (233 words)

Published: 10/22/2001

The crisis facing the air transport industry has led Estonia to suspend plans to sell the state's 34% stake in the national airline, Estonian Air. Estonian Air lost 2.5 mkroons ($0.15m) after its aircraft were grounded for three days, when it could not arrange sufficient war risk insurance cover. The company still continued to offer some flights through its 49% shareholder, Danish operator Maersk Air, using leased aircraft. Estonian Air resumed all its flights after it signed a new contract giving $1 billion of coverage, with the Danish insurer Codan, but with a substantial rise in premiums, which rocketed to $1m from $150,000. Estonian Air raised its ticket prices by 3-5% at the beginning of the month, to reflect the increase in insurance costs. According to Raimond Made, spokesman from Estonian Air, despite the disruption, the airline plans to end the year in profit, so long as the situation doesn't decline further. The carrier had earlier predicted a profit of between $ 0.6-0.9 m for the year, but has now scaled this down. In 2000, Estonian Air made a loss of 9.8m kroons ($0.7m), a significant improvement from a loss of 56m kroons ($4 m) in 1999. Among other shareholders is the Baltic Cresco Investment Group with a 17% stake.

Article ID: 2846