Profit goal set for airBaltic

RIGA - It will take about a year to stabilize the situation at airBaltic, savings bank Latvijas Krajbanka President Ivars Prieditis said in an interview with the daily Diena. “The airline’s restructuring plan and business model could be drafted by the end of this year. It will also be necessary to talk with the airline’s lenders to find out the required number and type of planes. The airline’s passenger flow must be maintained. I hope that the situation will improve next summer and people will continue to buy airBaltic tickets,” said Prieditis, adding that much will depend on fuel price dynamics.

Prieditis believes that 107 million lats (152.8 million euros), which will be invested in the airline’s share capital, are sufficient to modernize its fleet. “The new planes consume half the fuel and carry more passengers. The ‘fuel issue’ is highly important for the airline’s future,” he said.

On Sept. 29, shareholders - the Latvian state and Baltijas Aviacijas Sistemas - met to sign an agreement to invest 153 million euros in its share capital, effectively a bailout of the airline as it was teetering on the edge of bankruptcy.
The previous (and unfavorable for the state) shareholders’ agreement was annulled and the necessary investments in the capital will be made. With the agreement, the state has ensured actual control over the airline.

However, the cash infusion will not solve the airline’s problems, which include continuing operational losses due to competitive market forces and bad decisions made by airline management. The new investment will be used to carry the company’s losses while a new plan is developed, including getting rid of inefficient planes and bringing in new and better aircraft.
At the shareholder meeting it was also agreed to replace management, with airline President Bertolt Flick being forced to step down. AirBaltic “is still in search of a suitable candidacy for its third board member,” says Transport Ministry representative Aivis Freidenfelds, reports Nozare.lv.

Freidenfelds says that this position is highly important and the candidates’ assessment continues. The main requirement for the airline’s third board member is having “extensive experience in aviation,” said the Transport Ministry.
AirBaltic council chairman Gints Kirsteins said that the airline’s share capital increase, investments and other issues are currently being constructively solved in compliance with the shareholders’ agreement.

The airline’s representative, Janis Vanags, says that airBaltic continues to operate normally, as its shareholders’ support ensures stable operations at its base airport - the northern transit hub in Riga.
Vanags says that the airline’s shareholders have a clear goal - to restore profitability by 2014, and the airline’s new management will develop a long-term plan to achieve this.

Kirsteins has said that airBaltic is currently looking for the third board member both in Latvia and abroad. In the meantime, the airBaltic board chairman’s salary is being discussed. It is still not clear whether it will be similar to that of Flick’s, which many consider to have been excessive, especially considering the substantial money that the airline has lost – up to 95 million lats over the past 3 years.

Asked why the third board member and the possible airline’s president has not yet been appointed, Kirsteins pointed out that the salary question is important - everyone knows how much Flick received, therefore no one wants to work for less. This reasoning, however, makes absolutely no sense, as salary is dependent on what skills the candidate brings to the company, performance, and what the company can afford to pay, not on what the previous employee received.

Flick isn’t yet hanging up his wings. Possibly in pursuit of what he was trying to do while still president of airBaltic, namely setting up a competing airline based in Vilnius, Flick  has been named by Vilnius Municipality as one of the possible investors in a Vilnius airline project.

The Lithuania Tribune reports that “I can say that we had such a conversation,” confirmed Vilnius Mayor Arturas Zuokas in an interview with IQ.lt, pointing out that a few partners are considered as possible investors.
As Zoukas highlighted, the Vilnius municipality has stepped forward with a proposal to Flick. Zuokas stated to IQ.lt that Vilnius city is going to invest one million euros every year in the forthcoming Vilnius airline. The city government plans to maintain 34 percent of the company’s shares in its own holding, with the rest being owned “trusted” to business partners.
Six new members of the airBaltic council were elected at an Oct. 4 meeting, and the council in turn elected two board members, with the third member yet to be elected.

Elected to the council from the state were Latvian State Radio and Television Center board member Gints Kirsteins, Raitis Tukans, Niks Bulmanis, heretofore airBaltic council members, as well as Karl Gunther Sollinger, who has also previously served on the council and at SAS. For the private shareholders - Latvijas Krajbanka board member Martins Zalans and Russian citizen and financier Andrei Kutasin.

Kirsteins was appointed council chairman.
The council then elected two board members: airBaltic Chief Operations Officer Laila Odina and former investment banker, now CEO at the holding company Felix, Vitolds Jakovlevs.
A chairman of the board will be elected when the third board member is appointed.