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International Internet Magazine. Baltic States news & analytics Saturday, 17.04.2021, 05:43

Gauss: investment in airBaltic will return multiple times for Latvia

BC, Riga, 13.05.2020.Print version
State investments in the share capital of the Latvian national airline airBaltic will provide an opportunity for the company to return to profitable operations, and in the coming years will be repeatedly returned to Latvia in the form of taxes and direct payments to state companies, airBaltic CEO Martin Gauss told LETA.

He said that by analyzing the Covid-19 spread and impact in other markets before the outbreak reached the Baltics, the airBaltic team was able to work on different scenarios in order to prepare for the upcoming crisis. Since February 28, an action group Covid-19AG was established at the company, which regularly evaluated the latest situation and took the necessary measures.

''During the crisis we at airBaltic have set priorities for going forward – Stay, Revise and Grow – each stage consists of the top tasks to support airBaltic’s future development,'' he said.

He explained that each crisis in the past has shown that there is always growth coming after recovery. At the beginning it is important to find ways how to maintain the business to still be there when the crisis is over. For airBaltic just like for any other business the main aim of the first stage was to achieve a significant cost reduction in order to be able to stay afloat. This included revised payment schedules with suppliers, staff reduction and postponement of investments as well as management salary reductions, he said.

''airBaltic had to make a hard decision to reduce workforce by 700 employees at the same time still retaining more than 1 000 employees. airBaltic’s strong cash position, enabled the company to pay employees and provide additional compensation, as well as a re-employment guarantee,'' Gauss emphasized, and added that the new revised business plan with a clear strategy secured the equity increase of up to 250 million euros by the majority shareholder - the Latvian Government.

''The State investment is based on the new business plan of the company and will cover the extraordinary costs caused by the COVID-19 during and after the crisis. The investment will enable the company to return to profitable operations. In the upcoming years this investment would be returned to Latvia multiple times in taxes, direct payments to the State companies as well as providing a strong positive GDP impact,'' Gauss went on to say.

While the company has achieved significant cost reduction it is operating with reduced revenues. There are various categories which the company needs to pay – i.e., leasing contracts, insurance, rent, fuel hedge contracts, staff salaries and compensations for unemployed staff as well as additional expected cost for restarting operations, he said.

''During the second stage we are introducing changes to our products to reflect key components: GREEN, CLEAN, EASY. airBaltic will restart operations with a single Airbus A220-300 fleet and foresees around 40% in seat reduction for the next year. In addition, in this phase airBaltic is revising its products and service taking into consideration suggestions from its passengers. This is the time when businesses’ can revise their offer and create improved products adjusted for the future needs,'' he said.

''With all the planned support and actions taken from airBaltic it is planned to return to the third pillar of our current plan – growth. Once the flights are resumed airBaltic will adjust to the demand and will offer destinations from all three Baltic capital airports to the business hubs in Europe. Over time we will also evaluate options to launch new destinations.,'' the airline's CEO went on to say.

He said that by 2023 airBaltic plans to reach the pre-crisis level of operations, and once airBaltic is back on a growth path the company will re-employ the staff who have currently left the company and will return to a 2,000-2,500 person team within the next years. ''By 2025 – we plan to fly with up to 80 Airbus A220-300 aircraft and perform an IPO taking the airline to the international stock markets,'' he said.


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