PM Silina approaches Estonian and Lithuanian governments on investing in airBaltic

RIGA - Latvian Prime Minister Evika Silina (New Unity) has politically approached the governments of Estonia and Lithuania with a proposal to consider investing in Latvia's national carrier airBaltic, which is planning an initial public offering (IPO).

In an interview on TV3 channel, Silina said that the neighbor countries have yet to respond to Latvia's proposal but that the Latvian government would continue to work in that direction.

According to Silina, a successful IPO was the main requirement for the sacked airBaltic CEO Martin Gauss and the company's next management.

Asked whether she backed Gauss' dismissal as airBaltic CEO, Silina said that the company had been facing challenges for some time. The company's management twice failed to prepare and implement the IPO, which is why first its supervisory board was replaced, but now the new board has assessed the performance of the CEO, and Silina has no reason to question its decision, which was made after the Transport Ministry expressed no confidence in the company's management.

Asked whether Gauss' replacement could have a negative impact on the IPO, Silina argued that there should be no such direct impact, as the issue is not just about the CEO but about many circumstances. In any case, Silina believes that solutions had to be found to the situation.

The prime minister indicated that the State cannot currently invest directly in airBaltic, as this is prevented by the European Commission's requirements. Accordingly, the State cannot be the only buyer in the IPO, there must be other investors as well.

The prime minister implied that she also had reservations about the airline's profitability. "The question is why does airBaltic have so many expenses that we have questions about," said Silina, "it is important for us to have a strategic partner, but not at any cost... It is important for us to align our expenses with our capabilities... Lufthansa's entry is good, but we need to review the airline's strategy to see how much it is costing us."

Silina now expects the Transport Ministry to come up with a new strategic vision for the development of airBaltic, in which the airline would be preserved as a strategic national company, but the costs would be balanced in the business plan. The prime minister also implied that she expects an assessment of the cost-efectiveness of airline's flight destinations.

The prime minister would like to see a new airBaltoc CEO or a shortlist of candidates for the job already in May.

As reported, the supervisory board of the Latvian national airline airBaltic on Monday dismissed the airline's CEO Martin Gauss from his job, the Transport Ministry informed LETA.

airBaltiic executive board member and COO Pauls Calitis has been appointed the airline's acting CEO. CFO Vitolds Jakovlevs also continues to serve on the company's executive board.

During the airBaltic shareholders' meeting on Monday, airBaltic's largest shareholder, the Transport Ministry, expressed no confidence in Gauss. Following the shareholders' meeting, airBaltic's supervisory board convened for an extraordinary meeting. In view of the shareholder's vote of no confidence, the supervisory board decided to dismiss the current executive board chairman Gauss, effective Monday.

airBaltic shareholders at the meeting today also approved the airline's loss of EUR 118.159 million in 2024.

airBaltic is an important company for the national economy and it must be able to develop independently and adapt to external conditions, said Transport Minister Atis Svinka (Progressives).

airBaltic supervisory board chairman Andrejs Martinovs thanks Gauss for his leadership, dedication and vision since 2011, noting that for more than a decade Gauss has led the company through significant change, laying a strong foundation for the future of the airline.

The main business objectives remain unchanged and airBaltic continues to work towards implementation of its strategy and the potential Initial Public Offering, added Martinovs.

"airBaltic acting CEO Pauls Calitis says that airBaltic continues to operate with unwavering commitment to its strategic objectives and that the company's operational performance will not be affected. He adds that the airBaltic team is strong and motivated and the airline is ready to continue stable development.

According to the Transport Ministry, Calitis is an experienced aviation professional with a 30 year career at airBaltic. Calitis joined the airline in 1995 as a pilot and later began to work in airBaltic management. In 2020, Calitis was appointed the airline's COO and became a member of the executive board.

The Transport Ministry emphasizes that the company's operations will not be affected. airBaltic is and will remain a strategically important company for Latvia, ensuring connectivity and making direct contribution to the national economy. The shareholders' objective is to improve the company's competitiveness as it continues to move towards IPO.

As reported, the Transport Ministry, airBaltic, and Lufthansa Group have signed an agreement, according to which Lufthansa Group will invest EUR 14 million in airBaltic for a minority stake, and Supervisory Board seat.

In return for its investment, Lufthansa Group will receive a convertible share granting a 10 percent stake, which will be issued at a subscription price of EUR 14 million and converted into ordinary shares upon a potential IPO of airBaltic. After IPO, the size of Lufthansa Group’s stake will be determined by market pricing of the potential IPO, with Lufthansa Group’s holding amounting to no less than 5 percent of airBaltic.

In August 2024, the Latvian government agreed that the state should retain at least 25 percent plus one share in the capital of airBaltic after the IPO.

The acquisition of a convertible share granting a 10 percent stake in national airline airBaltic by Germany's Lufthansa Group for EUR 14 million is vetted by Germany's Federal Cartel Office (Bundeskartellamt).

The Latvian state owns 97.97 percent of airBaltic's shares, while the financial investor, Danish businessman Lars Thuesen's Aircraft Leasing 1, owns 2.03 percent.

airBaltic carried 5.2 million passengers in 2024, which is an increase of 13 percent against a year before, while the number of the airline's flights rose 7 percent year-on-year to 47,000.

airBaltic Group posted an audited loss of EUR 118.159 million last year, compared to a profit of EUR 747.572 million the year before, while its revenue increased by 11.9 percent year-on-year to EUR 747.572 million, according to the information published by the company.