The National Audit Office will prepare a special report on the quality of establishment of the state’s new airline

Toomas Mattson | 11/9/2015 | 10:48 AM

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Auditor General Alar Karis: “We must take this as a lesson so we can avoid making the same mistakes in the future”

TALLINN, 9 November 2015 – On the request of Auditor General Alar Karis, the National Audit Office will be preparing a special report to inform the Riigikogu and the general public about whether or not the Government has been diligent upon the establishment of the new Estonian airline and whether or not it has managed all of the risks as much as possible, as ignoring them may have played a part in the problems of Estonian Air and led to the decision that ca 85 million euros of the money spent to support the company was prohibited state aid.

The special report focuses on the decisions made by the Government before the establishment of the new airline in autumn 2015 and the quality of decision-making. As the new companies (OÜ Transpordi Varahaldus and AS Nordic Aviation Group) require big investments – ca 70 million euros – the National Audit Office will investigate whether the information on which the government’s decision is based allowed for making a wise and prudent decision, and that taking unjustified risks and non-compliance with the state aid regulations of the European Union was avoided.

The audit will also clarify how the Government made its decisions about Estonian Air since the acquisition of the majority holding in the airline from the Scandinavian airline SAS in 2010 and whether any mistakes were made when the decisions were prepared. The National Audit Office will also analyse whether the negative state aid decision of the European Commission could have been prevented.

Auditor General Alar Karis said that the National Audit Office will not be looking for someone to blame, but the main goal of the audit is to analyse the quality of the decision-making process on the basis of this specific case, as quality is important in the case of all of the decisions made by the Government, not just the ones made in this case. “During the weekend, I heard some people say that trying to figure out why things went the way they did would be pointless, there’s not a lot you can do with hindsight, let’s just look into the future,” said the Auditor general. “In this case, however, hindsight and learning from it are important so we can avoid making the same mistake in the future.”

Karis said it’s important to acknowledge that the decisions, which caused the need to support Estonian Air with tens of millions of euros of taxpayers’ money, were made by specific people in a specific situation, at a certain time and based on certain information. “The reality in business is that some things succeed whilst others fail,” said the Auditor General. “Anyone can make a business decision that should work, but doesn't. Aviation is a highly complicated and constantly changing field. The audit should show whether the decision-makers only had two options, one of them bad and the other worse, or whether they were superficial, incompetent, and ignored the facts,” he added, pointing out that the National Audit Office has often highlighted problems in the management of public undertakings, responsibility of supervisory boards, and the inability of the state as the owner to clearly express what it wants.

The National Audit Office has sent the Government several letters since 2010 to warn about the risks related to Estonian Air, in which it also drew attention to the risks of state aid, the need to coordinate activities with the European Commission and so on. In its letter sent in 2013, the National Audit Office stated that the Government had intentionally and repeatedly breached the rules of requesting permission for state aid and granting such aid, and that the changes in Estonian Air’s strategy did not comply with the restructuring principles established by the European Commission. Last Saturday, the European Commission announced its decision that draws attention to the same problems and qualifies the tens of millions of euros given by the Government to Estonian Air as prohibited state aid. “The National Audit Office can give advice to the Government and has done so on numerous occasions,” said Karis. “However, decisions are made by the Government, which is supervised by the Riigikogu.”

The National Audit Office is hoping to introduce the results of the audit to the Riigikogu and the general public in February 2016.

The National Audit Office published three letters from 2010 and 2013 from the correspondence about Estonian Air.

 

Toomas Mattson

Head of Communication Service, National Audit Office
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  • Posted: 11/9/2015 10:48 AM
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