Trust in Gauss has been lost and he cannot continue working at airBaltic - Greens/Farmers

RIGA - Trust of the Union of Greens and Farmers in the chairman of the board of the Latvian national airline airBaltic, Martin Gauss, has been lost and he cannot continue to lead the company, the party's chairman of the board Armands Krauze told LETA.

After the Greens/Farmers' board meeting, where the situation with airBaltic was discussed, Krauze expressed his conviction that the company's management is currently failing, for which Gauss must take responsibility.

"As a political force, we cannot fire him, because we have to follow the procedure laid down by law. This is a task for the company's supervisory board. The problems are not last minute, they have accumulated over the last year. The engine problems were known about for a long time, but the delay has created new problems," said Krauze.

Krauze stressed that the company's supervisory board should decide on the dismissal of the CEO, but the Transport Ministry should monitor the supervisory board's activities.

The politician stressed that the engine problems and the cancelled flights affect many people. Krauze added that flights are not only cancelled but also rescheduled, which is inconvenience for passengers.

Krauze reminded that the initial public offering of airBaltic shares has also been delayed and that the general perception is that the company is being managed in an unprofessional manner.

"The remuneration of the chairman of the board of our national airline is astronomical and we believe that it is possible to find someone who can manage this company better," said Krauze.

As reported, airBaltic announced on Thursday, January 2, that it will cancel 4,670 flights from all its bases for the summer season 2025, the airline said on Thursday.

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, Transport Minister Kaspars Briskens (Progressives) 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.

The minister emphasizes that it is absolutely unacceptable that the company's management has not publicly explained its decisions.

At the same time, Briskens reminds that the management of airBaltic - including the company's CEO Martin Gauss and chairman of the supervisory board Klavs 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 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.

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.

LETA also reported, in 2023 airBaltic's audited turnover was EUR 664.289 million, up 33.2 percent on 2022, and the company made a profit of EUR 33.852 million, compared to a loss the year before.

In 2023, airBaltic carried 4.536 million passengers, which is by 35.7 percent more than in 2022, and conducted 44,100 flights, up 18.3 percent from a year ago.

The Latvian state owns 97.97 percent of airBaltic's shares, while the financial investor, Danish businessman Lars Thuesen's Aircraft Leasing 1, owns 2.03 percent.