Kampars criticizes Flick’s methods

RIGA - AirBaltic President Bertolt Flick said in a statement that he, as the person responsible for the national airline, “will not allow an incompetent political stooge’s presence in there” in response to apparent threats made by Latvian Economy Minister Artis Kampars in a statement on June 13 about forcibly taking over the airline. Flick declared that talk of an “aggressive takeover” means resorting to force and Mafia methods, even against operational management of the airline, which is responsible for flight safety, reports Nozare.lv.

“As the head of airBaltic and its co-owner, I can say that Kampars’ actions call to mind Soviet methods,” says Flick.
In the statement, Flick points out that he has headed airBaltic since 2002, when it carried 200,000 passengers, had only five planes and constantly suffered financial losses. “Under my guidance, the airline has experienced rapid growth, with 3.5 million passengers and 34 planes,” he declares, adding that crises were overcome before, in both 2008 and 2009, when the domestic market in the Baltics dissolved.

“Just because a company during a certain period operates with losses, doesn’t mean that despite the law, contracts and European practice, management can be taken over using criminal tactics,” retorted Flick.
The problems at airBaltic should be resolved by “taking over access to information and operations management in an aggressive manner” from the current management of the airline, said Kampars in an interview with Latvian State Radio on June 13.

AirBaltic operated with a loss of 18 million lats (25.7 million euros) in the first five months of this year and is close to bankruptcy, Kampars said in an interview with Rietumu Radio on June 10. The minister believes that the huge loss was created on purpose, to “pump out funds” from the company.
Kampars said that “Last year the Latvian government invested more than 15 million lats into the company… [now] the company is losing enormous [amounts] money.”

He sharply criticized management methods, where a large part of processes that are important to airBaltic daily operations - financial management, service provision, fuel supplies - have been entrusted to companies that are directly connected with Flick’s private company. Additionally, the actual owners of his private company are unknown as they control it via offshore companies.

According to Kampars, he is responsible for the use of state funds, and he is worried that the most valuable assets of airBaltic are being handed over to offshore companies. Kampars mentioned the sale of the airBaltic brands as an example. Contrary to what airBaltic management promised, the brands still have not been returned to the airline.

The current management of the airline has not provided data about the airline’s largest shareholders, whereas CEO Flick has been located outside Latvia for a long time already, said Kampars.
The economy minister believes that all of this proves that the management works in pursuit of their own interests, not the interests of the airline.

TV3 broadcast program ‘Neka personiga’ (Nothing Personal) reported previously that if the state opts to keep its shares in airBaltic, it should immediately invest at least 90 million lats in the airline, a sum necessary for the airline’s continuing existence, according to Transport Minister Uldis Augulis’ (Union of Greens and Farmers) report to the government about the situation within airBaltic. The report states that besides this 90 million lats, 1 billion dollars should also be invested in the airline in the long term.

Augulis in his report urges the government to sell the state-owned airBaltic shares. The TV3 broadcast said that Chinese airline Hainan Airlines’ high-level representative and co-owner visited Augulis a few weeks ago, who said he was prepared to buy all airBaltic shares.

AirBaltic’s council will meet in the near future to discuss the airline’s current financial situation. It is unknown if Flick will attend the meeting because the Corruption Prevention Bureau has launched a criminal process against him for misuse of power.
The airline has demanded that Kampars step down from his post after his comments and has promised to turn to the courts and the Prosecutor’s Office. “The economy minister should step down after his comments. Latvians have a saying - do not saw the branch you are sitting on. AirBaltic is a company in which Latvia is a majority shareholder. Kampars’ irresponsible comments have caused much damage to the airline,” said the airline’s vice-president of corporate communications, Janis Vanags.

Augulis has sent a letter to the shareholders of airBaltic pointing out the airline’s losses in the first quarter of the year and informing them of the state’s restricted possibilities in financially supporting the company if it becomes necessary. The transport minister points out that, taking into account the shareholders agreement signed in 2009, according to which the state currently has little influence in the airline’s commercial activities, the company is basically being managed by representatives from the airline’s private shareholders, and thus the state will not be able to put additional money into the company if it becomes necessary.

Airlines in the U.S. and Europe are, similar to airBaltic, reporting losses in the first quarter of this year, writes business daily Dienas Bizness. These losses are explained due to various reasons, including rising fuel prices.
Last year’s results also showed losses for these airlines in the first quarter, though they went on to report profits for the full year. Flick attributes the losses so far to seasonal factors, slow winter travel months, the same as experienced by most European airlines.

The Air Transport Association forecasts overall industry earnings for 2011 to reach 4 billion dollars, 53 percent lower than what it had forecast in early March. Last year’s industry earnings were 18 billion dollars.

As the public spat between airBaltic shareholder representatives deepens, Augulis on June 14 suggested that a full appraisal of the situation can better be made after the KPMG audit and Fredheim International analysis. The audit is due on July 4.