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Latvia Injects €250M Into airBaltic

by John Ollila
May 8, 2020
Reading Time: 3 mins read

The Republic of Latvia has today decided that it will inject up to €250M (€204M immediately) equity in the country’s struggling flag carrier airBaltic.

Latvia’s ownership in airBaltic raises from 80% to 91% that is pending approval from the EU Commission (won’t be an issue during Covid-19).

You can access airBaltic here.

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Here’s an excerpt from LETA (access their piece here):

The Cabinet of Ministers on Thursday decided to invest up to EUR 250 million in share capital of Latvian national airline airBaltic, Prime Minister Krisjanis Karins (New Unity) told the press after the meeting.

Transport Minister Talis Linkaits (New Conservative Party) explained that this will increase the state’s stake in the company to 91 percent, and this move will be coordinated with the European Commission.

“This investments will help the company to overcome the crisis, continue development, retaining competitiveness and Latvia’s connectivity with other European countries,” said Linkaits, adding that airBaltic is a significant aviation cornerstone and economic drive for Latvia.

The government’s decision is based on the company’s new business plan that stipulates for considerable reduction of costs, reduction of the fleet and the number of employees.

Here’s the announcement from airBaltic:

Riga. The Cabinet of Ministers of the Republic of Latvia, as the majority shareholder of Latvian airline airBaltic, has today approved the investment of up to EUR 250 million into the equity of airBaltic in order to mitigate the company to overcome the economic crisis caused by COVID-19.

Martin Gauss, the CEO of airBaltic, said: “With this new equity investment, we can begin to execute our new business plan Destination 2025 CLEAN which focuses on a new start for airBaltic once international flight resume. This will facilitate successful growth for the company once the impact of the COVID-19 crisis begins to ease.”

The Latvian government’s plan, which remains subject to the approval of the European Commission, is to provide its investment to airBaltic in tranches. Each investment tranche will be provided in line with market rules and will not exceed the losses caused as a result of COVID-19 crisis.

Following such investment, the Latvian state’s shareholding in airBaltic will increase from 80.05% to 91%.

On April 23, the Supervisory Board of the Latvian airline airBaltic approved the new business plan of the company presented by the management of airBaltic. The new plan foresees a reduced fleet for the upcoming years, initially resuming operations with 22 Airbus A220-300 aircraft. The new plan takes into account the reduced capacity for the years 2020 and 2021, while at the same time foresees return to growth with up to 50 Airbus A220-300 aircraft by the end of 2023. The additional 30 options of Airbus A220-300 remain for future growth.

Here’s email that airBaltic sent out to its passengers:

airBaltic Email

Conclusion

At least the Latvian government here takes a realistic view, as Finland did with Finnair, and instead invests more capital into the airline its majority owns than merely guarantees loans.

AirBaltic is a player in the Baltics and Northern Europe. It often pops up in searches when I am flying to get to Helsinki from somewhere in Europe. I have not flown with them due to them not aligned with any of the alliances and charging for everything like LCCs all do.

It is, however, an essential airline for the region after Estonia allowed Estonian Air to collapse.

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