Sunday, July 30, 2017

Adria - Nordica partnership ended in loan


Estonia's national airline Nordica, which was set up in late 2015 with the assistance of Adria Airways, ended its partnership with the Slovenian carrier in November 2016 by giving it a 4.556 million euro loan at a contractual interest rate of 15%. For a year following the foundation of Nordica as the successor to bankrupt Estonian Air, Adria was the carrier's most important partner, providing it with a booking system, as well as operational services and staff training. “One of the advantages of this cooperation model was the placement of advance payments and deposits into the partner’s accounts, covering their running costs and potential business risks”, Toomas Uibo, Nordica's Marketing and Communications Manager, said. “When the partnership ended in 2016, a part of Nordica’s liquid assets in Adria were converted into a loan as agreed by both sides", he added.

The result was a debt by Adria to Nordica in the form of cash debt converted into a loan to the amount of 4.556 million euros, as listed in Nordica’s annual report under “Other receivables”. “The conditions of this instrument, among them the interest rate, are agreed with international auditors and legal advisors and correspond to accounting norms, as well as to best business practices”, Mr Uibo stressed, adding that though the partnership with Adria has ended, the two companies are still working together. The loan is listed in euros. The interest rate of the agreement is 1.9%, while the loan period is six years. The loan’s internal interest rate is 15%, according to the annual report.

Pricewaterhouse Coopers audited Nordica's annual report and added its comments, confirming that the financial state of Nordica corresponded to good practice, with the exception of its loan to Adria Airways. The auditors wrote in their comment that they hadn’t been able to find “sufficient proof” of similar interest rates in the market, and hence they hadn’t been able to find sufficient evidence either to assess the likelihood of Adria ever paying back the loan. The cooperation agreement between Adria and Nordica was expected to last until at least the end of 2017, however, late last year the Estonian airline opted to ink a similar deal with LOT Polish Airlines and end its arrangement with Adria. It has never been disclosed how much of a financial incentive Adria received for its partnership with Nordica, which was negotiated by the carrier while it was still in state hands. In its 2015 financial report, the airline's new owners, 4K Invest, hailed the tie-up. Jan Palmer, who at the time advised 4K Invest, urged the Estonian government to ink a commercial alliance with Adria. Mr Palmer was also an advisor to Nordica.

49 comments:

  1. Now we know how they survived last winter.

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    1. Not just winter but all of last year.

      “One of the advantages of this cooperation model was the placement of advance payments and deposits into the partner’s accounts, covering their running costs and potential business risks”

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    2. This is not a correct translation. It really should be something like this.
      "One of the preconditions of this cooperation model was the placement of advance payments and deposits into the partner’s accounts, covering their expenses and potential business risks that arise from the cooperation with Nordica".
      Original quote in estonian: http://www.err.ee/609290/nordica-ja-adria-partnerlus-loppes-krobeda-intressiga-laenulepinguga

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  2. Whenever things like this come up, I always think how come no one cares about who and what this 4K is. When Etihad got 49% of Air Serbia, people were screaming off the top of their lungs how they wanted to see the contract between Etihad and Air Serbia. What about 4K? Who are they? No one knows anything about them. No one knows who their past or present clients are. Their website certainly does not list them. No one knows who actually owns them. Last time a Slovenian press tried to find out it turned out to be Iranian capital. No one knows their plans for Adria. It's really odd that no one seems to care.

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    1. Why should people care about Adria's plans? It's a private company now, and they can do whatever they want. Either buy 100 aircraft or close shop tomorrow.

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    2. Ofcourse people should care because private or not it is the national airline of Slovenia, which has been supported by tax payers until January 2016. Its the airline that has a huge share at Ljubljana Airport and whose collapse would hit the Slovenian economy. Being a private company does not give you a free pass to act as if you have no responsibilities to the community.

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    3. And to add - the least the Slovenian government should have done is clearly state who they sold the company to and under what conditions.

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    4. + 1000 anon 9:16.

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    5. What responsibilities to the community? They do not operate any PSO routes. Airlines are free to compete and operate on a free market.

      About supporting economy, if it weren't for protectionism from the government (keeping Adria on life support for decades), we would have seen more foreign carriers in LJU. And they would probably pay their suppliers and service providers on time (fuel, airport charges, ATC services) instead of having to convert debt into shares (remember how LJU became owner of Adria Tehnika?).

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    6. JU is still government owned meaning that the millions they get come from the national budget. You know, the same budget in which there isn't enough money for the health or education system yet there is for Air Serbia and its endless list of new business plans.

      Adria was privatized and the company is no longer a burden on the national budget. When the Serbian government sells its remaining shares then you will see the same talk as with JP.

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    7. I must admit it is odd that Adria is 4Ks only known client. There is no record of them buying any othet company or a portfolio of clients on their website.

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    8. Adria is (was) a national airline with huge support to slovene economy and who does not understand strategic non capita economy will be always just an accountant. Another masterpeace of slovenian politics.

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    9. Actually, if you are a businessman and not an accountant or a theoretician then you will understand that letting JP go while opening up the market the benefit to the local market will improve while expenses will go down. Adria is a relic of a past time.

      JP can survive only as long as they don't have to complete with anyone.

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    10. Actually it was Slovenian economy and taxpayers money that was supporting Adria, not vice-versa.

      Count again all those millions of EURs sunk into the black hole.

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    11. Didn't they even get in trouble with the EU for all the money Adria got?

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    12. The best argument against JP is the LON market. Look at what happened when real businesses took over.

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    13. Anon 10.35
      Politics played a key role in protecting them and airBaltic.

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    14. It is well known that EU Transport Commissioner Violeta Bulc played her role in Adria not being found guilty of illegal state aid. But she could not care less about Estonian Air. They were found guilty. Conveniently, the next day Adria is forming partnership with Estonian government and creating a new airline in Estonia.

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    15. No it's not. It's just in your head.
      Adria was cleared in July of 2014. Bulc was appointed as a Commissioner in November 2014. + She just even got elected into politics two months before that.

      Not to say that you cleary don't have any clue how EU works.

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    16. Anon 10:04
      I don't think you should open the market. To who? Wizz to fly on Tue morning and Thu afternoon? Or VLM to fly with the F50?

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    17. How about easyJet, Ryanair, Transavia, KLM, Lufthansa, Aegean... you know, those properly run businesses.

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  3. Why did they end the deal with Nordica in the first place?

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    1. LOT offered better terms?

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  4. Haha you won't get terms on a loan like that anywhere.

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  5. I'm interested to know where they found the money to buy Darwin? Less than a year ago they sold Adria's brand name to survive and now they suddenly have money to buy another airline?

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    1. Dude, Adria didn't buy it from its own capital, the funds came from 4K. That's as if JU bought YM, the funds would come from the government, not the carrier

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    2. They were not paying anything. They got it for free. Same with Adria. Both screwed previous owners wanted to get rid of it. So called asset management. It's just that they got headeaches instead of assets.

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  6. Apparently, Adria ended last year with a profit of some 4 million euros. BUT, it did have to sell the brand name for 8 million in order to post that profit. Talking about creative accounting, hehe.

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    1. Hehe they are cool

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    2. Creative accouting has been their MO for quite a while.

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    3. Well as long as it gets the job done, right? The end justifies the means.

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    4. It's a nice PR, profit and all. Remember that you need to pay tax on profit. So not only you have loss, but because of shiny PR you need to pay even more tax on top of it.

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    5. You only have to pay it if the government makes you pay it. I am sure the SLO government isn't rushing them.

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    6. Another sad part of Slovenia. If you are self-employed and pay your taxes with 1 day delay, you are not insured. But companies can delay paying taxes and social contributions for years, and nothing happens.

      Any similarity with Adria is purely coincident.

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  7. Cekaj cela nemacka autoidustrija je jedna velika prevaranska udruga, a vi trazite da 4K prikaze odakle im kapital? Industrija im pravi proizvode kao SFRJ nekada za razlicita trzista i neki se bune. HeHe.

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  8. OT: Wataniya Airways adds 4 weekly flight beetween Kuwait City and Sarajevo due to strong demand!

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  9. The deal with Nordica was obviously a sweet one. I wonder why they terminated it.

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    1. It wasn't terminated by Adria, it was terminated by Nordica.

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    2. Because LOT bought 49% of Nordica.

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    3. ok thanks. That makes more sense now.

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  10. I don't think there is a single airline in ex-yu that doesn't have fishy business practices.

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  11. OT: this weekend at Split Airport 55.000 pax

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    1. 55K? Uffff that hurts ��

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    2. Bravo, Split! So, possibly over 600 000 pax in July?

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    3. The General Manager of Split Airport has confirmed at Nova TV that the number of passengers exceeds 600.000 pax in july 2017

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  12. Adria is without doubt the most secreteive of the ex-yu airlines. No financial reports, no knowledge of who is behind their owner, their CEO has given one interview since they took over...

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  13. OT: Kalitta 747-400 BCF was on holding over Cres for a while (Fueldump?).
    Now it is descending over Istra, don't know yet where the Jumbo will land..

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    1. N743CK is landing in RJK, touchdown.

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