Decision time for airBaltic

RIGA - With a circus atmosphere engulfing Latvian national airline airBaltic due to reported large losses, and verbal sparring between airline representatives and government ministers, Russian billionaire Vladimir Antonov in an interview with business daily Dienas Bizness has spoken out to calm the situation, saying that the airline’s operations are not going to “come to a halt,” reports Nozare.lv. “I know who wants to buy airBaltic and who wants to invest money into the airline, one way or another. I know these people very well. And all I can say is: rest assured, you may safely buy tickets and fly airBaltic. I know for certain that the operations of airBaltic will not come to a halt. Of course, we have to keep in mind that there may also be others who might want to buy airBaltic,” said Antonov.

Antonov is a co-owner of Convers Group, a company that controls Latvian savings bank Latvijas Krajbanka and Lithuania’s Snoras Bank, which have issued loans to Baltijas Aviacijas Sistemas (BAS), the private airBaltic minority shareholder.

The billionaire also believes that now is not the right time for the government to sell state-owned airBaltic shares, because the price for these shares, he says, will not be high. Nevertheless, a “management model” must be developed for the airline, that would generate profits for the state.

Considering whether a major aviation market player wished to buy airBaltic shares, he says that “It all boils down to the risk.” The Transport Ministry has received a written offer from British charter flight operator Ocean Sky Aviation Ltd.
Regardless of what the state decides to do now, Antonov explained that the government must not pretend that the problem does not concern them. Instruments must be found to support airBaltic, and an investor has to be sought to ensure further development of the airline. The value of the airline depends on how these matters are tackled, either hysterically or in a civilized manner, says Antonov.

Economy Minister Artis Kampars (Unity) said at the beginning of June that airBaltic operated with a loss of 18 million lats (25.7 million euros) in the first five months this year and was close to bankruptcy. The minister believes that the huge loss was created on purpose, to “pump out funds” from the company.
The minister complained that “Last year the Latvian government invested more than 15 million lats into the company, to make sure that airBaltic can buy new planes on lease and continue development. AirBaltic head and co-owner Bertolt Flick showed the government his business plan that was promising a large profit this year and in 2012 - instead, the company is losing enormous [amounts of] money.”

Kampars went on to criticize management, pointing out that a large part of the processes that are important to daily operations - financial management, service provision, fuel supplies - have been handed off to companies that are directly connected with Flick’s private company. On top of this, the actual owners of his private company are unknown as they control it via offshore companies.

Flick, running the airline now from his Berlin quarters, had harsh words during a press conference on June 15, aimed at Latvian officials while he announced that he is prepared to purchase the state’s majority shares.
A shareholders’ meeting is set for July 25. During the meeting, they will elect a new council and decide on a possible increase of the airline’s core capital, said Flick on June 22. Flick emphasized that the airline’s core capital must be increased in order to develop the airline and modernize its fleet.

“We have received confirmation from potential investors, and they are highly interested in the development of airBaltic. The private shareholder, the joint-stock company Baltijas Aviacijas Sistemas, is also willing to invest in the airline’s development,” added the absentee chairman.

It was on June 21 that Ilmars Razumovskis and Jean-Charles Korsak - representatives from BAS - decided to step down from the council. BAS board member Inga Piterniece said that the reason is “simple.” She said that “The ones representing the state have been very sloppy for years,” adding that the government has switched its reps more in the past 12 months than in the past 15 years of airBaltic’s operations.

“Those sitting on the council must certainly act much more responsibly toward their duties,” she opined.
Transport Minister Uldis Augulis declared though that despite recent developments, the functions of the airline’s council have not been stymied.

Ministry spokesperson Aivis Freidenfelds counters that opinion, saying that “The council’s work is now basically paralyzed.” Review of the latest audited financials,  however, has started.
AirBaltic was established in 1995; its principal shareholders are the state of Latvia with 52.6 percent, and BAS, owned by Flick and Taurus Asset Management Fund Limited, with 47.2 percent of the company.