The Latvian government yesterday received final approval from the European Commission to proceed with the €250 million worth equity increase in the flag carrier. This is meant “to contribute to overcoming the economic consequences of the COVID-19 crisis in the Latvian economy,” while enabling it to grow in the future, the airline has made public in a press-release.
airBaltic, which was facing an imminent default, will not only be able to focus on overcoming the current crisis brought about by the COVID-19 pandemic, but it will also ensure a prosperous growth that the airline itself mapped in its “Destination 2025 CLEAN” plan back in April.
airBaltic's Airbus A220-300. Photo by Jero Vida | AeroNewsX
The CEO of airBaltic, Martin Gauss, noted that “the EC had concluded that the recapitalization will contribute to overcoming the consequences of the crisis” and seized the occasion to thank the “Latvian society and the government for the confidence in the future of the airline.” He concluded by stressing on the hard work that the management and employees have demonstrated both “to the company and to the Baltics through the crisis.”
The carrier plays a key role in the region as it notably contributes to the economy – Latvian foreign trade relies on air service as it connects local businesses with strategic locations in Europe and beyond.
However, the state-backed-aid is subject to specific conditions that intend to compensate for the alterations provoked in the context of free-market competition. In this matter, the Executive Vice-President of the European Commission, Margrethe Vestager (in charge of competition policy) said that there are some “strings attached to the support, including a dividend ban and share buybacks.” Other conditions include strict limitations on management remunerations, where bonuses will be banned, at least until a 75% of the equity investment is redeemed.
airBaltic's Airbus A220-300 with Latvia's flag livery. Photo by Max Sutter | AeroNewsX
With such aid, the participation of the already majority shareholder of the company (the Latvian public with 80.05%) will surge to at least 91%, while the remaining 9% will be owned by Danish businessman Lars Thuesen. Nonetheless, it has also been expressed by European regulators that the Latvian government should reduce its shares proportion “once the economic situation allows.”
The airline has recently resumed flights to London (as of 1st July) and it is in the process of resuming flights to popular leisure destinations along the Mediterranean Sea.