Corruption Prevention Bureau to probe airBaltic CEO Gauss' possible conflict of interest

RIGA -The Corruption Prevention Bureau (KNAB) has opened a probe into airBaltic CEO Martin Gauss' activities to assess their compliance with the Law On Prevention of Conflict of Interest in Activities of Public Officials, KNAB representatives informed LETA.

According to the KNAB representatives, the anti-corruption bureau has received statements from private individuals about Gauss' alleged conflict of interest.

At the beginning of January, Girts Lapins of the National Alliance claimed in posts on social media that "Martin Gauss is the owner of the German company MaGau GmBH, which in turn owns the company 2e systems gmbh. This 2e systems gmbh is a supplier to airBaltic".

airBaltic representatives told LETA that 2e systems has been airBaltic's business partner since 2026, which is four year before Gauss received the offer to join airBaltic as CEO.

As he took the helm of airBaltic and learned that 2e systems is a supplier to the airline, Gauss declared his connection with this company. Gauss' asset declaration shows that he owns a 100 percent stake in Magau Gmbh, which holds a 1.25 stake in 2e systems, airBaltic representatives explained.

They underlined that notwithstanding his small stake in 2e systems, to avoid conflicts of interest, Gauss has always refrained from any involvement in decision-making related to this supplier. The company's representatives noted that any person can own shares in companies, which is a regular and commonplace practice in international business.

According to the airBaltic representatives, the airline fully complies with Latvian laws and corporate governance standards, and that Gauss disclosed his ownership of 2e systems shares when he joined airBaltic, which was also mentioned in his management board member contract in 2011. Gauss thereby refrained from any involvement in decisions related to this supplier, ensuring transparency and compliance with conflict of interest regulations.

The airBaltic representatives also stressed that questions regarding 2e systems has triggered discussions in the media and on social networks, which has resulted in spreading false information. In order to dispel any shadow of suspicion over airBaltic, the company's management and corporate governance, airBaltic has proactively contacted KNAB to provide an explanation of the situation and all necessary information to prove compliance of airBaltic and its management with the regulatory framework and established contractual policies.

The airBaltic representatives added that 2e systems provides IT services in the area of ticketing, e-commerce and website maintenance for several of the world's leading airlines, including airBaltic. According to airBaltic, the contract has been concluded and is maintained in strict compliance with airBaltic's contractual policies, ensuring full transparency.

Information on 2e systems' website shows that in 2019 airBaltic and 2e systems started a project to expand and enhance the airBaltic ticketing and booking solution. The two teams actively collaborated to expand the existing online booking solution that would support airBaltic's growth plans.

As reported, the government coalition on Monday did not yet decide on replacing airBaltic CEO Martin Gauss and will instead wait for decisions of the airline's shareholders.

After the weekly coalition meeting, Prime Minister Evika Silina (New Unity) said that airBaltica is a company of national importance, its mission is to ensure the mobility of Latvia's people and it must perform this mission well. "Unfortunately, the announcement at the beginning of the year of flight cancellations was not fully explained," said Silina, adding that the announcement initially confused the public.

According to the prime minister, the coalition is counting on the shareholders' meeting scheduled for January 21 to assess the performance of the national airline's current management.

Silina added that airBaltic is doing well overall and work needs to continue.

Among coalition partners, the Union of Greens and Farmers has so far been voicing the harshest criticism of the airBaltic management. After the Greens/Farmers' board meeting on January 3, where the situation with airBaltic was discussed, the party's chairman Armands Krauze said that Greens/Farmers have lost confidence in Gauss and that he must not continue to run the company.

As reported, performance of the supervisory board of national airline airBaltic will be evaluated at the company's shareholders meeting on January 21.

Transport Minister Kaspars Briskens (Progressives) stressed that airBaltic is a strategically important company for the country, which contributes directly not only to the aviation industry, but to the entire Latvian economy. In order to ensure continued growth of the airline, the company's management has pledged to raise EUR 300 million for implementation of the airline's business plan.

"People have to keep their promises and, if circumstances change, always have a clear plan B. We judge the work of the supervisory board and, in particular, its chairman, Klavs Vasks, based on results, correct and timely communication, and the ability to manage the company even in challenging times," said Briskens.

airBaltic has announced that it will cancel 4,670 flights from all its bases for the summer season 2025.

The cancellations are a result of unexpected delays and prolonged engine maintenance by its supplier, Pratt & Whitney. The engine manufacturer's inability to meet its timely maintenance obligations has impacted the operational capabilities of airBaltic's Airbus A220-300 fleet, forcing the airline to adjust its summer schedule.

After this announcement, Briskens said on X that the Transport Ministry has instructed the supervisory board of national airline airBaltic to promptly explain the airline's decision to cancel a number of flights and its impact on Latvia's connectivity.

At the same time, Briskens reminds that the management of airBaltic - including Gauss and Vasks - must keep their promises to raise EUR 300 million to implement the company's business plan and to ensure that airBaltic's activities are in the interests of the state of Latvia and passengers.

It has also been reported that 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 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.

Briskens 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.