AirBaltic faces hurdles in talks with strategic investor

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AirBaltic faces hurdles in talks with strategic investor

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By Sky Industry News

Jan 6, 2025

An executive from airBaltic has revealed that discussions with a strategic investor have encountered difficulties. These talks were expected to validate the airline's business model and facilitate its initial public offering (IPO). Klavs Vasks, chairman of the supervisory board at airBaltic, expressed concern over the airline being at a significant crossroads regarding its future.

In a LinkedIn post, Vasks highlighted that while Latvian Minister of Transport Kaspars Briškens has repeatedly stated that raising capital is the responsibility of Vasks and CEO Martin Gauss, shareholder support remains crucial for enabling an IPO. AirBaltic is primarily owned by the Republic of Latvia and Aircraft Leasing 1. "The first steps towards the capital markets have been associated with significant challenges," said Vasks. He noted negotiations with a strategic investor had not progressed as smoothly as hoped.

Though no specific investor was named, previous reports suggested Lufthansa Group might be interested in acquiring a 10% stake in airBaltic. Vasks also pointed out political challenges affecting the carrier's plans and emphasized that local politicians need to make bold decisions if airBaltic aims to proceed with an IPO.

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Vasks urged stakeholders to recognize airBaltic's impact on Latvia's economy. According to the International Air Transport Association (IATA), airlines contributed $1.9 billion to Latvia’s GDP in 2023. CEO Martin Gauss shared this information on X, formerly Twitter.

Despite these challenges, Vasks mentioned that an IPO could occur within months, contingent on agreements with investors and market conditions. However, he warned about unsustainable bond obligations and interest rates affecting long-term operations.

On May 7, 2024, airBaltic issued €340 million in bonds at a 14.5% interest rate over five years and three months. The funds partly refinanced previous debt and aimed to enhance liquidity for fleet investments.

Vasks stressed that continued operation under negative equity isn't viable if airBaltic wishes to meet obligations and strategic goals. He acknowledged potential media backlash over additional capital injections but argued investment is essential unless Latvia intends to relinquish its shareholding.

Finally, Vasks called for patience and understanding from all involved parties: "As a key driver of economic growth...airBaltic's contribution...is irreplaceable." He urged stakeholders not to undermine one of Latvia’s most influential brands for political gain.

AirBaltic reported a net profit of €40.2 million for Q3 2024 but faced engine maintenance issues impacting flight schedules during IATA's summer season.