Business in Latvia: Long term state support expected for airBaltic

Long term state support expected for airBaltic

Pursuant to the “airBaltic ReShape” restructuring plan if a strategic investor is not found for Latvia’s national airline airBaltic, the airline will require an additional 96 million lats (137.1 million Euros) from the state budget from 2013-2016.
According to Latvian Government, Transport Ministry and legal advisers, ReShape envisages that the airline’s costs will be restructured and that it will return to profitability in 2014. However, the portal believes that this is only part of the truth. Indeed, the plan envisages that airBaltic could conclude 2012 with 38 million lats in losses, 2013 with 16 million lats in losses, 2014 with 10 million lats in profit, 2015 with 9 million lats in profit, 2016 with 16 million lats in profit and 2017 with 4 million lats in profit. Nevertheless, it has not been publicly mentioned that, according to the plan, airBaltic risks returning to losses post-2016, since the airline’s potential profit depends on external factors. Searching for buyers Currently negotiations are continuing with all potential investors who previously expressed interest in purchasing airBaltic.

According to legal consultants: “So far, we have been open to proactive investor offers expressed previously. When the government regained control over the company, serious market players realized that airBaltic is in safe hands and its future can be discussed. All potential investors were heard out, though no serious investors have been turned down,” said representative of legal consultants “Prudentia”. In order to develop cooperation with Qatar Airways, Latvia and Qatar must sign a bilateral agreement on cooperation in aviation, said representative of Prudentia . The Transport Ministry is now actively working on the agreement that will most likely be signed by the end of the year. During last week’s visit to China, negotiations were also held with China’s four largest airlines - Air China, China Southern, China Eastern and Hainan Airlines. An advertisement placed in the European and British editions of the Financial Times by the Transport Ministry on August 27 invited non-binding expressions of interest by November 1 for a stake of up to 50 percent minus one share in airBaltic.

Wishful thinking Prudentia partner Girts Rungainis, along with Krastins, in counting on an optimistic forecast coming true, said that the sale of the airline should not be rushed because, according to the airline’s business plan, its value will increase “significantly” by 2014 and more investors will be interested in the airline, investment banking company “. According to Mr. Rungainis, at the moment, there are more airlines in Europe and the world that want to be sold, and fewer airlines willing to buy. “Of course, from Latvia’s standpoint, finding an investor for airBaltic is closely associated with the airport and the development of the airport,” says Rungains, adding that previous co-owners and the management of airBaltic are wanting that the airline be sold as soon as possible, so they could recover some of the money invested in the previous, unsuccessful business model of airBaltic. Thanks to the new business plan, airBaltic indexes should improve in the second half of this year, therefore the sales process could continue for at least two years, stressed Krastins. “air Baltic Corporation” is Latvian national airline company, located in Riga, Latvia and serving migration possibilities for business trips as well as tourists coming from Europe, America or elsewhere.

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