Tallinn - Tallink Group, an Estonian operator of ferries in the Baltic Sea denied press reports Monday that it is preparing to take to the skies as well as the waves by purchasing national airline Estonian Air.

Newspaper Aripaev reported that Tallink and the Estonian Economy Ministry were working together on a plan to buy out the 49-per-cent stake of Estonian Air which is currently owned by pan-Scandinavian airline SAS.

Last week SAS said if it could not secure a majority share of Estonian Air, it would sell its shares.

It has already announced an intention to do so in neighbouring Latvia where it holds a 47-per-cent stake in the national carrier, airBaltic, after the Latvian government refused to sell up.

SAS president and chief executive Mats Jansson has sent a letter to Estonian Prime Minister Andrus Ansip saying his company would inject more capital into the airline only if the government sells its shares to SAS.

The Estonian government views Estonian Air as a crucial national asset, bringing businesspeople and tourists to the small Baltic country, and is reluctant to give up its
34-per-cent stake in the company.

Economy Minister Juhan Parts is a strong advocate of continuing state involvement in Estonian Air.

Citing "unconfirmed sources," Aripaev said Parts had been negotiating with Tallink board members a deal that would see the Estonian government buy SAS's shares and then sell a majority stake to Tallink, which also runs hotels and taxis as well as its core shipping business.

The remaining 17 per cent of shares are owned by investment company Cresco.

"We don't have any negotiations going on at the moment," a Tallink spokesperson told Deutsche Presse-Agentur dpa, adding that no further announcements on the subject were likely to be made.

An accompanying company statement said, "Contrary to speculations in the media, Tallink Group is not in negotiations to acquire any holding in Estonian Air."

If that is the case, it means the Estonian government still needs to address its potential tug-of-war with SAS for ownership of its national carrier.

Estonian Air operates eight aircraft from Tallinn airport serving around 20 scheduled destinations in Europe. Total assets at the end of 2007 were 33 million dollars. (dpa)