Estonian politicians skeptical about buying stake in airBaltic

TALLINN - Estonian politicians from both the opposition and governing parties are reserved about the possibility of their country investing in Latvia's national carrier airBaltic and instead suggest focusing on strengthening the competitiveness of Tallinn Airport.

Estonian politicians have been cautious in their comments on Latvian Prime Minister Evika Silina's (New Unity) suggestion that the three Baltic states should jointly coordinate the operation of the state-owned airline. Silina did not specify exactly what kind of involvement Latvia expects from Estonia and Lithuania.

Estonia has so far declined the offer to buy a stake in airBaltic, and the country's political parties say that Estonia should avoid direct involvement with the financially troubled company.

Aivar Soerd, a member of the Reform Party's parliamentary group, noted that Latvia has yet to make a concrete proposal. However, he remains skeptical of any potential deal.

"If such proposals are made, they should be reviewed, but investing by acquiring a stake is out of the question. Estonia has already declined once, and the situation has significantly worsened since then," Soerd stated.

Soerd pointed out that while airBaltic's most recent annual report showed a slight decrease in losses, this was primarily due to the revaluation of dollar-denominated loans rather than operational success.

"airBaltic has very little free cash or liquid assets, while its long-term liabilities exceed EUR 400 million. Most of this - nearly EUR 400 million - is held in bonds with an enormous 14.5 percent interest rate. This is extremely unusual and indicates immense risk. Investors have clearly assessed the company's risk as very high; bond prices have plummeted to 40 percent of their value on the stock exchange," the Estonian politician explained.

Soerd also highlighted the company's vulnerability to volatile fuel prices, noting that airBaltic has hedged only 10 percent of its fuel costs.

"For comparison, Lufthansa and Ryanair have hedged up to 80 percent. The price per ton of jet fuel has already risen to nearly USD 1,500 - more than double what it was at the beginning of the year - and there is no telling where prices will go next. With some Italian airports already imposing fuel supply restrictions, the situation is dire. Acquiring a stake would be equivalent to burning taxpayers' money; it is unthinkable," Soerd said.

Marek Reinaas of the liberal Eesti 200 party expressed his conviction that the state should interfere with private business as little as possible.

"In aviation, Estonia has pursued a strategy of supporting Tallinn Airport to ensure that a variety of airlines fly to many different destinations. I believe this is the correct decision," Reinaas said. "I would not recommend acquiring a stake in airBaltic - not for the state, not for a company, and not for any private individual. It would be a high-risk investment."

He added that while Estonia will certainly discuss any formal proposal from Latvia, the northern neighbor should not be responsible for covering airBaltic's losses.

Reili Rand, a member of the opposition Social Democratic Party's parliamentary group, told ERR that the future of aviation is fraught with uncertainty due to rising fuel prices and intense competitive pressure across the sector.

"When discussing how to spend Estonian taxpayers' money in such a turbulent climate, we must act with extreme responsibility. airBaltic's need for cash has been significant and growing for years; I do not see any reason or opportunity for the Estonian state to enter what appears to be a bottomless financial hole," Rand stated.

Rand noted that the experience of Tallinn Airport shows the market is functioning well, driven by Estonians' consistent need for air travel.

"Even when one airline exits a route, another typically steps in. Competition has remained strong, and new players have been able to capture market share quickly. With nearly three million passengers a year, our market follows a logical and sufficiently attractive path for carriers," Rand said.

Rand added that Estonia has made strategically sound choices by keeping its aviation portfolio diverse. "Unlike our southern neighbors, we are not dependent on a single airline. If the state begins clearly favoring one company, it stifles competition and increases future risks," she explained.

"Of course, certain strategic direct routes are vital for Estonia, and we already have a functioning tool to support them: the route support fund. For example, the Tallinn-Hamburg route opened just last week, providing an important connection to northern Germany. For such routes, we can review the fund's conditions and direct additional resources if airBaltic's situation significantly impacts our connectivity. We can increase funding, extend support periods, or adjust terms," Rand suggested.

While acknowledging that airBaltic is a matter of national survival for Latvia, Rand emphasized that Estonia's situation is different. "We have a well-functioning, competition-based approach. Given the uncertainty of the aviation industry, we cannot begin filling airBaltic's money pit with Estonian taxpayers' funds," she said.

Despite these concerns, Rand expressed hope that airBaltic will resolve its financing needs and that any impact on Estonian travelers will remain minimal.

Anastassia Kovalenko‑Kolvart of the opposition Centre Party stated that her party also opposes an investment in airBaltic, noting that the airline has been operating at a loss for several years.

"They have faced serious problems, and such an investment would represent a significant additional cost. Given our very negative experience with Nordica, we would be acquiring a loss-making stake with little certainty of added value," Kovalenko‑Kolvart said.

According to Kovalenko‑Kolvart, Estonia should instead focus on diversifying the number of airlines operating at Tallinn Airport. However, she argues this is hindered by the government's requirement that the airport pay dividends.

"The airport has recently raised its service fees, and as a result, several low-cost routes have left Estonia. Competition has weakened, and there are no longer enough operators offering affordable prices to Estonians. We are in a situation where the government has required the airport to pay as much as seven million euros in dividends this year. To cover this, the airport raises its fees, driving routes and operators out of the market. This is the issue we should be focusing on, rather than acquiring a stake in a Latvian airline," Kovalenko‑Kolvart explained.

The politician added that instead of paying dividends to the state, the airport should be permitted to reinvest that capital into its own development.

Estonian aviation expert Sven Kukemelk also believes that an Estonian investment in airBaltic would not be reasonable.

"If we, as a country, wanted to acquire a stake in airBaltic, we should bear in mind that half of its fleet flies on behalf of third country airlines. Of the remaining flights, about 30 percent are from Riga, about 10 percent are from Tallinn and 10 percent from Lithuania. Investing a lot of capital to acquire, say, a third of an airline just to provide 10 percent of the flights does not seem like a very good or sensible investment plan," the aviation expert explained.

Kukemelk said that the current situation will have a significant impact on airBaltic's summer schedule, but the real test will be the transition to the winter schedule at the end of October.

However, Kukemelk urged people to buy flight tickets, noting that airlines need customers to operate.

"I am quite optimistic about this. "The difficulties of airBaltic are nothing new for Latvia. Over the last 20 years, it has been like a kind of continuous Santa Barbara (TV series), during which the Latvian state has continuously found ways to invest more and more money, totaling more than EUR 1 billion over the years," Kukemelk said.

However, the Estonian expert pointed out that in the current situation of rising fuel costs, ticket price increases are inevitable for airBaltic and other airlines.

As reported, the government decided on Tuesday to grant airBaltic a short-term loan of EUR 30 million due to the sharp rise in fuel prices. The government decision has yet to be approved by the Saeima.

airBaltic's losses last year amounted to EUR 44.337 million, which is 2.7 times less than in 2024. Last year, airBaltic's turnover increased by 4.2 percent compared to 2024 and amounted to EUR 779.344 million.

In 2025, the airline carried a total of 5.2 million passengers on its route network, an increase of 1 percent compared to 2024.

At the end of August last year, German national airline Lufthansa became a shareholder in airBaltic. Currently, the Latvian state owns 88.37 percent of airBaltic shares, Lufthansa - 10 percent, financial investor Aircraft Leasing 1, owned by Danish businessman Lars Thuesen - 1.62 percent, and 0.01 percent - other shareholders. The company's share capital is EUR 41.819 million.

After the initial public offering (IPO) of airBaltic shares, the size of Lufthansa's stake will be determined by the potential IPO market price. The transaction also provides that Lufthansa will own at least 5 percent of airBaltic's capital after the potential IPO.

On August 30, 2024, the Latvian government agreed that the state should retain at least 25 percent plus one share in airBaltic's capital after the IPO. On August 19, 2025, the government decided that Latvia, like Germany's Lufthansa, would make a co-investment of EUR 14 million in airBaltic ahead of a potential IPO.

However, given the 2025 financial results and market conditions, airBaltic has suspended its planned IPO and does not currently view it as a potential source of capital for 2026, according to airBaltic’s annual report.

The report indicates that, despite the expected improvement in operational and commercial performance, the airline will operate with a negative free cash flow in 2026, and, based on current forecasts, management expects that an additional capital injection of EUR 100 to 150 million will be required to finance operations for the 2026/2027 winter season.