RIGA - Current bond liabilities and interest rates cannot ensure a sustainable long-term operation of the Latvian national airline airBaltic, which means an additional capital injection from the state is likely to be unavoidable, Klavs Vasks, chairman of the airline's supervisory board, writes on LinkedIn.
In order to meet its commitments and achieve its strategic objectives, airBaltic cannot continue to operate with negative equity accumulated over the years, says Vasks, adding that an additional capital injection from the state is therefore likely to be unavoidable unless the government is prepared to fully relinquish its investment to other investors.
Vasks also notes that even then, the amount needed for a sustainable development of the company could be insufficient, unless such an investment is made as part of an initial public offering (IPO), which would allow to raise the required amount of capital in line with the company's business plan.
According to Vasks, the earliest possible date for the airBaltic IPO is spring 2025, depending on the timing of the final agreement with the strategic investor and the financial market situation. However, Vasks acknowledges that time is not on airBaltic's side.
Vasks also admits that the negotiations with the strategic investor, which was supposed to be both a validator of airBaltic's business model and a facilitator of the IPO process, have not gone as smoothly as expected.
Vasks also argues that the airline's impact on the Latvian economy goes far beyond its operational activities. As a key contributor to economic growth, export potential and regional connectivity, airBaltic's contribution to Latvia's economic lifeblood is irreplaceable, says Vasks.
He points out that building and developing a strong company takes much more time and complexity than destroying it through ill-considered or short-term politically motivated decisions.
Vasks therefore calls on everyone involved to show patience, understanding and a more optimistic view of the future. "With a clear vision and joint action, we can ensure not only the success of airBaltic, but also broader economic growth," the chair of the supervisory board believes.
As reported, the share capital of airBaltic will be reduced by EUR 571.293 million in preparation for an initial public offering (IPO), the government decided at a closed cabinet sitting on August 30, 2024.
The terms of the share capital reduction state that airBaltic's current share capital is EUR 596.473 million, which means that after the planned reduction it will be EUR 25.179 million.
The company's share capital currently consists of 25,647,282 Class A shares with a nominal value of EUR 10 each, 74,323,152 Class B shares with a nominal value of EUR 3 each, 113,164,518 Class C shares with a nominal value of EUR 1 each, and 38,660,300 Class D shares with a nominal value of EUR 0.1.
As it prepares for the IPO, airBaltic has decided to simplify its share structure. As a result, the nominal value of all Class A, B and C shares will be reduced to EUR 0.1 and EUR 571.293 million will be allocated to to offset accumulated losses from previous years. Shareholders will not be paid any remuneration or compensation in connection with the reduction in the nominal value of these shares.
Thus, the share capital of airBaltic after the reduction will be EUR 25.179 million, consisting of 251,795,252 dematerialized shares with a nominal value of EUR 0.1 per share. Each share will entitle the holder to one vote at the company's shareholders' meeting, a dividend and a liquidation allowance.
Transport Minister Kaspars Briskens (Progressives) said earlier that the talks with airBaltics' strategic investor are not being held to sell a controlling stake but that the plan is to sell a minority stake in preparation for the IPO.
Bloomberg news agency reported, citing people familiar with the matter, that German national airline Lufthansa is considering taking a stake in airBaltic ahead of the Latvian state-owned carrier's proposed IPO.
Briskens has not yet officially disclosed whether the potential strategic investor is Lufthansa, as well as how many shares in airBaltic could be sold to the investor and for how much. "Work is ongoing. There must be a mutual agreement to disclose such information. As soon as the transaction documents are finalized, both sides will immediately comment on it," the minister said earlier.
At the same time, Briskens stressed that the responsibility for the capital increase lies with airBaltic CEO Martin Gauss and Vasks. "The performance of the company's management will be evaluated on the basis of the results achieved," the transport minister said.
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