Airport, Financial Services, Investments, Latvia, Transport

Transit passengers who would have flown to Riga on these flights just to board the next leg of their flight from Riga have by now found other transit options, and these passengers will never return.

"It is transit passengers that [airBaltic CEO Bertolt] Flick very rightly designated as the airline's target, necessary to renew airBaltic’s profit. Now we will be losing them," said the expert.

In the expert's opinion, the developments regarding airBaltic are odd: Latvia used to have a flourishing airline all the time, with increasing passenger numbers and market share in Europe – except it was never revealed at what price.

The expert also stressed that no one had seen the report accounting for the airline's loss of LVL 34 million in 2010. Furthermore, the CEO of the airline is involved in a number of transactions, which make it clear that the company is in much worse financial trouble than one might think.

These transactions include the sale of SAS shares – without which, as Flick had put it, the airline's operations would have come to a halt – as well as flight cancellations allegedly due to insufficient passenger numbers, the ongoing layoffs, debts to the Tallinn Airport, planned flight cancellations at the end of this year and in 2012, and the reported profit of LVL 3.5 million by a company that rents out airBaltic pilots.

All these facts suggest that airBaltic is completely out of money. Next could come delayed salary payments to the airline's employees, and the airline's debts to cooperation partners could increase, believes the expert.

In shareholders' opinion, there is just one important task now: to realize the reason for the losses and find a solution in order to make the company solvent.

"Mr. Flick shows by his actions that he will reveal no information. Not even to his employer, the state. This is a totally absurd situation. Instead of meeting with all the shareholders and telling them openly how bad everything is, that the goals set for the airline have not been attained and that the shareholders must now together consider rescuing the company that is so important to Latvia, Mr. Flick is being evasive and makes decisions that he does not bother to explain. On a private company's board, this person would simply not be believed by anyone, with all the ensuing consequences," says the expert.

Asked how the situation could be remedied, the expert notes that the company is short of cash, which must be found for the company without further delay. An investor has to be found ready to invest in the airline, cover its losses and help it continue development.

The expert believes that there still are many corporations in the aviation business that would be interested in investing money in airBaltic in exchange for a certain package of shares that would enable them to strategically influence the airline's further development. For the state, it would be most advantageous to sell the stake, currently held by the minority shareholder, to such an investor. That is, the state would have to buy out airBaltic shares that belong to Baltijas Aviacijas sistemas, and immediately sell them to the investor in a trilateral deal.

The experts admits though that such deals are time consuming, therefore, a conceptual decision must be made first, and cash must be injected in the airline to keep it alive. "Of course, all of that will be possible if the state has a say in where the money goes and who gets paid for what," he added.