Merger to create new Baltic carrier?

  • 2007-08-15
  • By Mike Collier

TAKEOVER TO TAKEOFF? Merging Estonian Air and airBaltic would seem to make sense

TALLINN - Scandinavian airline giant SAS is hatching plans merge the Estonian and Latvian aviation companies, Estonian Air and airBaltic, the German paper Hansdelsblatt reports.

SAS managing director Mats Jansson told the paper that the company is holding talks with the Estonian and Latvian governments with the purpose of becoming majority owner of the two companies.

The Estonian state owns 34 percent of Estonian Air, 49 percent belongs to SAS and 17 percent to the Cresco investment company. AirBaltic's major shareholders are the Latvian State with 53 percent and SAS with 47 percent. In order to facilitate a merger, SAS would like to take a majority shareholding in both companies.

Recently, SAS said that it would sell its existing holdings in Spanair, bmi and Air Greenland in order to focus on its northern European operations, and the sell-off would mean that SAS would have plenty of cash available to tip it over the 50 percent mark.

Given airBaltic's non-national name and its increasing influence in the Lithuanian market as well as the rapid development of Riga as a regional hub, it should be fairly straightforward to roll Estonian Air's operations under the airBaltic umbrella.

airBaltic spokesman Janis Vanags told The Baltic Times: "We can't make any specific comment on future plans at the moment because this is issue that must be decided by airBaltic's owners. So far what we can say is that the partnership between both of our owners - the state of Latvia and SAS - has been very fruitful because they have agreed on a joint strategy with regard to development of the company.

"We saw that our earnings before tax depreciation grew by almost 4 million lats over the last six months."

Asked if a merger might complicate and slow the rate of airBaltic's expansion, Vanags said: "I can't make a judgment on that yet because there is no specific outcome of these talks. But the market is really growing currently with strengthening demand. This is a very, very optimistic signal regardless of the question of ownership."

airBaltic's latest set of figures will indeed make satisfactory reading for ambitious company president Bertold Flick. The number of passengers carried during the first six months of the year rose from 635,000 to 866,000, turnover increased from 51 to 71 million lats and the stated operational result registered an impressive 57 percent rise from 5.87 million lats to 9.22 million lats.

However, cabin occupancy rates remained virtually unchanged and earnings before tax dipped from 1 million lats to 700,000 lats, a fall of 31 percent. Flick explained the latter result thus: "The cost of aircraft leasing reduced the share of earnings before tax in the first six months, as we were already paying for aircraft before they start making profit. However, we expect improvement of this index in the next six months of the year."

All figures are compared to the same period in 2006.

Meanwhile, smaller competitor FlyLAL-Lithuanian Airlines announced Aug 22 that it will operate two flights a day between Vilnius and Tallinn on workdays, in the mornings and evenings, from Sep. 3.

"Our twice-daily service will offer the chance of day trips to Tallinn, which is particularly important for business travelers," FlyLAL-Lithuanian Airlines CEO Saulius Stasiunas said.

Stasiunas also said that they expected that the additional flight would encourage more passengers to travel from Tallinn via Vilnius to other destinations offered by the airline.

"Vilnius Airport's geographical location is convenient for travelers going to all major European airports," he said.

FlyLAL-Lithuanian Airlines operates direct scheduled flights from Vilnius and Palanga to 18 European destinations and offers flights to more than 500 destinations worldwide under code-sharing arrangements with its partners.

The airline is owned by FlyLAL Group, which also comprises BPC Travel, FlyLAL Technics, FlyLAL Training Centre, Passenger Terminal, FlyLAL Charters and Aviation Assets Management.

FlyLAL Group is controlled by three Lithuanian companies, including Fima with a 30 percent stake, ZIA Valda with 45 percent and Sanitex with 25 percent.