Cabinet of Ministers has agreed to invest up to EUR 250 million into airBaltic base capital, Prime Minister Krisjanis Karins has announced after the government meeting.
Transport Minister Talis Linkaits explained after the meeting that this decision would help increase the state’s share in the company to 91%. This investment will be coordinated with the European Commission.
“This state investment will help the company overcome the state of emergency and continue develop, preserving competitiveness and Latvia’s connectivity with other European and other countries,” said the Linkaits, explaining that for Latvia airBaltic was the cornerstone of aviation industry and the engine of the entire economy.
The transport minister said he was confident that “exiting the crisis, the company will have sufficient strength to preserve its place in Europe’s aviation network”.
According to him, the government’s decision was based on airBaltic’s latest business plan, which provided for considerable measures to reduce costs, the fleet and number of employees.
“We value that the company’s management has decided to reduce its wages and the company’s CEO Martin Gauss has decided stop payment of his wage for the duration of the crisis. I am certain the company will exit the crisis strong and we will preserve Riga as the Baltic aviation center,” said Linkaits.
The minister says the state funds of EUR 250 million into the company’s capital will be invested in three stages based on the situation in the industry.
“We will look cautiously if there is any need to invest such a large amount. We will start with EUR 204 million in the first stage and then perform previously supported base capital increase of EUR 36 million in state loan conversion. Then we will look how the industry develops, what the situation is and if there is a need for additional investments,” said Linkaits.
According to the minister, the airline’s minority shareholder Danish businessman Lars Tussen’s owned company Aircraft Leasing 1 has decided not to participate in the first stage of the base capital increase. Nevertheless, the minority shareholder will be able to in future stages.
“This is why this decision mentions that the state share increases to 91%, but we allow for the possibility for the minority shareholder to participate with their investment at some stage,” said the minister.
Linkaits said he valued the minority shareholder’s support for airBaltic and the measures undertaken by the airline to reduce costs.
The government’s previous decision – to convert the EUR 36 million loan into base capital – remains in force, and it will be done in the first stage together with EUR 204 million.
“This means the total potential increase amount may be EUR 250 million plus EUR 36 million,” said Linkaits.
The airline’s representative Alise Briede informs that with this investment Latvian state’s share in airBaltic will increase from 80.05% to 91%.
Latvian government plan, which needs to be approved by the European Commission, provides for investing into airBaltic in multiple instances. Each portion of financing will be provided in accordance with market rules, without exceeding the loss amount caused by the crisis caused by COVID-19 pandemic.
airBaltic CEO Martin Gauss said this new influx of capital would help the airline to execute its new business plan Destination 2025 Clean, which focused on a new beginning, when all international flights became permitted again.
“This will contribute to the company’s successful growth once COVID-19 crisis influence reduces,” says Gauss.
The business plan Destination 2025 provides for a fleet of 50 Airbus A220-300, which means the number of employees will exceed 2,000.
“This sends out employees a strong message on return to work,” adds Gauss.
According to information from Firmas.lv, airBaltic base capital is EUR 256,472,824. (BNN/Business World Magazine)