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EC investigates airBaltic funding

Nov 28, 2012
From wire reports

EC investigates airBaltic funding
2 From wire reports, RIGA The European Commission has launched an investigation to look into whether various state support measures Latvia implemented to assist the national airline airBaltic are in accordance with European Union regulations on state support, said the European Commission Representation in Latvia spokeswoman Sanita Jemberga, reports LETA. She said that the commission has doubts whether these measures were implemented in accordance with EU regulations, and whether such measures would have been approved by a private business entity in a market situation. Since 2008, airBaltic has been experiencing financial troubles, and as a result, in 2010 and 2011, the state implemented several support measures to boost the airline. The European Commission will investigate whether these measures were implemented in accordance with EU competition regulations and whether they gave the airline unfair economic advantage compared with competitors in the open EU market. The day-to-day operations of airBaltic will not be hampered because of the European Commission investigation, says the Transport Ministry. The ministry says that the investigation will be a good opportunity to explain the processes that have taken place within the airline the past several years, which in turn will improve the chances of finding a strategic investor for the airline, as it has nothing to hide and this investigation will only help its reputation. The Transport Ministry also says that the decision made by the European Commission was not unexpected, as airBaltic’s former shareholder, Baltijas Aviacijas Sistemas (BAS), previously turned to the European Commission with a complaint. The Latvian side will continue its regular communication with European Commission institutions and use this opportunity to present more clarity on the change in the airline’s shareholders as well as on financial matters. Latvia will also continue to explain that all of the state’s investments in the airline were in accordance with EU regulations. The Transport Ministry also wishes to emphasize that taking into account EU aviation regulations, European airlines regularly go through similar investigations from the European Commission. The complaint made by Baltijas Aviacijas Sistemas to the European Commission is groundless, and is just an act of desperate blackmail by the airline’s former CEO and co-owner Bertolt Flick, Prime Minister Valdis Dombrovskis said in an interview on the Nov. 21 morning edition of the Latvijas Neatkariga televizija (LNT) news program ‘900 Seconds.’ The prime minister explained that BAS and Flick are complaining about decisions that they themselves persuaded the government to make - increasing the airline’s share capital. “Which we did on an equal basis,” Dombrovskis said. The prime minister said that this is a destructive step taken by the airline’s former shareholder, and recalled that BAS did not fulfill its contractual obligations, thus the state used its pre-emptive rights and took action. Dombrovskis refrained from predicting what the outcome of the European Commission investigation will be, but pointed out that airBaltic has involved specialists and lawyers to prepare an explanation to the Commission on the “baseless complaints.” Considering the ongoing difficulties in turning around the loss-making airline, despite a restructuring plan, airBaltic might be interested in a merger with Estonian national airline Estonian Air, which also faces severe difficulties in improving its cash flows and competitiveness, reports ERR. The Supervisory Council of Estonian Air changed the company’s head, assigning Jan Palmer as the new CEO from Nov. 1. In autumn 2010, after acquiring the majority of the company’s shares, the Estonian State set Estonian Air a target to increase connections from Estonia, and to achieve profitability. In 2011, in order to reach this goal, the company introduced a new strategy which focused on expansion of the route network. The outgoing supervisory board officials at Estonian Air have ruled out a merger; however, airBaltic CEO Martin Gauss said there was a promising opportunity. “As a manager, I can say that a merger could have potential. As our company’s name says, and it seems we picked the right name, the Baltic States are the natural market for us,” Gauss said. Several potential investors have expressed interest in purchasing shares in airBaltic in a recent offer. The Transport Ministry says that more information on the potential investors will not be released at this moment, as this information is “confidential.” An advertisement placed in the European and British editions of The Financial Times by the Transport Ministry on Aug. 27 invited non-binding expressions of interest by Nov. 1 for a stake of up to 50 percent minus one share in airBaltic. o

RIGA - The European Commission has launched an investigation to look into whether various state support measures Latvia implemented to assist the national airline airBaltic are in accordance with European Union regulations on state support, said the European Commission Representation in Latvia spokeswoman Sanita Jemberga, reports LETA.
She said that the commission has doubts whether these measures were implemented in accordance with EU regulations, and whether such measures would have been approved by a private business entity in a market situation.
Since 2008, airBaltic has been experiencing financial troubles, and as a result, in 2010 and 2011, the state implemented several support measures to boost the airline. The European Commission will investigate whether these measures were implemented in accordance with EU competition regulations and whether they gave the airline unfair economic advantage compared with competitors in the open EU market.

The day-to-day operations of airBaltic will not be hampered because of the European Commission investigation, says the Transport Ministry. The ministry says that the investigation will be a good opportunity to explain the processes that have taken place within the airline the past several years, which in turn will improve the chances of finding a strategic investor for the airline, as it has nothing to hide and this investigation will only help its reputation.
The Transport Ministry also says that the decision made by the European Commission was not unexpected, as airBaltic’s former shareholder, Baltijas Aviacijas Sistemas (BAS), previously turned to the European Commission with a complaint.

The Latvian side will continue its regular communication with European Commission institutions and use this opportunity to present more clarity on the change in the airline’s shareholders as well as on financial matters. Latvia will also continue to explain that all of the state’s investments in the airline were in accordance with EU regulations.
The Transport Ministry also wishes to emphasize that taking into account EU aviation regulations, European airlines regularly go through similar investigations from the European Commission.

The complaint made by Baltijas Aviacijas Sistemas to the European Commission is groundless, and is just an act of desperate blackmail by the airline’s former CEO and co-owner Bertolt Flick, Prime Minister Valdis Dombrovskis said in an interview on the Nov. 21 morning edition of the Latvijas Neatkariga televizija (LNT) news program ‘900 Seconds.’
The prime minister explained that BAS and Flick are complaining about decisions that they themselves persuaded the government to make - increasing the airline’s share capital. “Which we did on an equal basis,” Dombrovskis said.
The prime minister said that this is a destructive step taken by the airline’s former shareholder, and recalled that BAS did not fulfill its contractual obligations, thus the state used its pre-emptive rights and took action.
Dombrovskis refrained from predicting what the outcome of the European Commission investigation will be, but pointed out that airBaltic has involved specialists and lawyers to prepare an explanation to the Commission on the “baseless complaints.”

Considering the ongoing difficulties in turning around the loss-making airline, despite a restructuring plan, airBaltic might be interested in a merger with Estonian national airline Estonian Air, which also faces severe difficulties in improving its cash flows and competitiveness, reports ERR.
The Supervisory Council of Estonian Air changed the company’s head, assigning Jan Palmer as the new CEO from Nov. 1.

In autumn 2010, after acquiring the majority of the company’s shares, the Estonian State set Estonian Air a target to increase connections from Estonia, and to achieve profitability. In 2011, in order to reach this goal, the company introduced a new strategy which focused on expansion of the route network.
The outgoing supervisory board officials at Estonian Air have ruled out a merger; however, airBaltic CEO Martin Gauss said there was a promising opportunity. “As a manager, I can say that a merger could have potential. As our company’s name says, and it seems we picked the right name, the Baltic States are the natural market for us,” Gauss said.
Several potential investors have expressed interest in purchasing shares in airBaltic in a recent offer.

The Transport Ministry says that more information on the potential investors will not be released at this moment, as this information is “confidential.”
An advertisement placed in the European and British editions of The Financial Times by the Transport Ministry on Aug. 27 invited non-binding expressions of interest by Nov. 1 for a stake of up to 50 percent minus one share in airBaltic.

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