Airport, Financial Services, Latvia, Legislation, Transport

Valdis Dombrovskis and Andris Berzins. Riga, 24.08.2011. Photo: president.lv

airBaltic needs a professional manager with experience in the aviation industry, as well as have an international reputation, the prime minister pointed out.

As reported, yesterday, the government of Latvia decided to take part in bailing out airBaltic, stipulating the change of company's management as one of the main conditions, Transport Minister Uldis Augulis (Greens/Farmers Union) said after the government's session yesterday.

Consultant firm Prudentia has two weeks to evaluate how the state could participate in the further development of the company. Prudentia will evaluate two scenarios – the state participates as an equal as the company's second shareholder, or the state completely participates in all of the airline's operations. According to the government, selling the state's shares in airBaltic has not been recommended at this time.

Augulis explained that work should be done to replace the airline's current management within two weeks, as well as changes have to be made to the shareholders agreement so that the state would more influence in the airline's decision making process. An agreement also has to be made so that Riga airport remains the airline's main hub.

If the airline's minority shareholder does not agree to these conditions, the government will not be able to make the decision to bail out the airline. ''All of the shareholders must understand that that majority shareholder has the right to put forward its conditions,'' the minister said.

An LVL 63 million injection is necessary, therefore it must be decided whether the state will invest half of the sum or there has to be an additional issue of shares. If that will be done, the company can work for the rest of the year and auditors can give a conclusion about 2010 and the future activity. The government must act without delay because borrowing would be very costly.

LETA also reported, Air Baltic Corporation was established in 1995. The company's majority shareholder is the state of Latvia with 52.6% of shares. On the other hand, the company's minority shareholder is a company called Baltijas Aviacijas Sistemas, with 50% of this company owned by airBaltic’s president Bertolt Flick.