Latvia sells 20% of airBaltic to a German investor

The Latvian government signed an agreement with a German investor Ralf-Dieter Montag-Girmes, under which the latter will receive 20% of shares of airBaltic in exchange for increasing the Latvian national carrier’s capital by 52 million euros. The government will remain the airline’s majority stakeholder and will provide it with financial aid in the amount of 80 million euros, bringing the total amount of investment to 132 million euros. The increased funds will enable the carrier to purchase new aircraft instead of leasing them, and thus bring down its operational costs, Latvia’s Transport Ministry announced.

The carrier is likely to use the funds to purchase Bombardier CS300 narrow-body aircraft, industry experts believe. Besides that, the additional 132 million euros will make the cost of the airline’s assets exceed its liabilities. This will enable airBaltic to take out loans and continue its development.

The deal was approved by the Latvian Cabinet in November 2015 and supported by the Parliament later on. One of the terms of the transaction is a ban on airBaltic’s purchase of military equipment from the countries that fall under the European Union’s sanctions. This restriction applies to Sukhoi Civil Aircraft (SCAC), the producer of Sukhoi Superjet 100 (SSJ 100) regional aircraft. SCAC is part of United Aircraft Corporation, which manufactures defense equiptment.

AirBaltic will receive both sums in the form of short-term loans, which will later be converted into the airline’s shares. As a result, the government will hold 79.99% of the carrier’s equity. The government is still in search of a strategic investor for the carrier. Should they find one, Montag-Girmes’s share will be purchased back.