INTERVIEW: An unwelcome investor jets into Latvia

INTERVIEW: An unwelcome investor jets into Latvia
By Mike Collier November 17, 2015

“I did consider walking in there and saying: 'look, my hands are not dripping with blood. I do not eat babies',” says Ralf-Dieter Montag-Girmes.

The many barreled-named German investor has just emerged relatively unscathed from an extraordinary 90-minute grilling at Riga International Airport by the Latvian press – an attempt to explain who he is, where he's from and, most importantly, why he wants to invest €52mn in airBaltic, Latvia's troubled state-owned national airline.

In fairness, Montag-Girmes does not seem the baby-eating type. Sporting a crisp and sober suit, a tasteful black Junkers watch, and the barest hint of a German accent in the slightly aristocratic English that could be a legacy of his time at Oxford, he seems unruffled by his ordeal. His placidity is in contrast to his compatriot Martin Gauss, the airBaltic chief executive, who let his frustration bubble over in the press conference over questions of government leaks and media conspiracies, as well as perhaps lingering fear that Montag-Girmes might back out of a deal that airBaltic badly needs in order to modernise its fleet.

“It's very sad what is happening around the most positive decision in the last four years in Latvia. It's very sad how it happened, because what we achieved last week was a positive decision from the Latvian government to approve an investor and secure the long-term future of this airline. The result after six days is a complete political mess which has nothing to do with this successful airline,” Gauss tells bne IntelliNews through gritted teeth.

The furore surrounding Montag-Girmes' investment – which he insists comes entirely from his own personal fortune – has already claimed one victim in the form of transport minister Anrijs Matiss, who was sacked by Prime Minister Laimdota Straujuma on November 5. Far from calming the media feeding frenzy, it poured blood into the water and the smart money says Straujuma herself will be heading for the departure gates as soon as next year's budget is passed at the end of November.

Reasons to be suspicious

The reasons for all the controversy are myriad, but most concern whether Montag-Girmes is the right man with the right cash.

He has longstanding business links with Russia in both the financial and aviation sectors, having brokered deals to sell Russian jets to Cuba, Venezuela, Zimbabwe and Iran – countries with a less-than-Nordic reputation for business ethics and transparency. He also acted as a consultant in efforts to uncover the fraudulent collapse of Russia's Inkombank, a circumstance that has erroneously been reported as him having something to do with the collapse itself. And questions have been raised over why his businesses are all based in Cyprus, having relocated from Panama.

Perhaps there's also some understandable reticence on the part of the Latvians to do business with another mysterious German tycoon following airBaltic's stewardship under former CEO and chairman Bertolt Flick – a man who mixed politics, off-shoring and generally sharp practice with disastrous consequences that necessitated a government bailout of the airline in 2011.

“It doesn't happen very often that you come into a country, you want to make an investment, you look at it very hard and then you get challenged for it rather than thanked for it. I would certainly describe that as an interesting experience,” he says with bone-dry irony. “Clearly the airline is very important to the Latvian economy. I understand that and I also understand certain concerns the country has with its geopolitical position, but still I was surprised. We probably underestimated that.” 

Reports that his investment comes with a major string attached – that airBaltic will have to buy Russian Sukhoi planes in addition to the Bombardier CS300s it will be the first airline in the world to operate – are simply untrue, Montag-Girmes maintains. “If you run an aircraft leasing company, you have connections to a lot of manufacturers, as I do to Antonov in Ukraine, to Bombardier in Canada, to Let in the Czech Republic... in some respects I even do to British Aerospace… That's part of my business, but I am not linked to any particular manufacturer.”

One of the other things that raised eyebrows in the press conference was Montag-Girmes assertion that he first got interested in airBaltic in June this year when he happened to see Gauss giving a presentation in Paris. The fact that he had set up a trio of aircraft leasing holding companies in Latvia back in December 2014 is a “pure coincidence” he maintains. “We were very close to coming to an agreement with a European customer in summer last year. We started looking around at what would be a convenient jurisdiction for aircraft leasing and for that particular case we had identified Latvia, which in fairness has done a lot to modernise its legislation to attract exactly that sort of business... Unfortunately, that deal fell through.”

Good timing

The money he is prepared to put up is the largest single transaction of his 30-year business career, and doesn't come without risk, he acknowledges: “When you buy a pack of cigarettes, it says you can lose your health and you can lose your money. Here we have done a very thorough analysis of what is the risk/reward ratio and I would not have made such a decision if I did not like that ratio. I am not an addicted investor and I do not have a hobby of collecting airlines, particularly if they have a risk of going bankrupt.”

It seems remarkable that bankruptcy is a danger, but it is – especially if the deal does not go ahead and the Latvian government suddenly finds its airline short of €52mn. That could lead to a situation in which it would be forced to lease out the CS300s it has on order as soon as they are delivered, and would force a complete rewriting of the business plan, an exasperated Gauss told the press.

Yet with the collapse of Estonian Air on November 8 and the memory still fresh of two Lithuanian airlines failing within the last ten years, the market would appear ripe for exploitation by airBaltic. Bookings from Tallinn have tripled and the disappearance of a direct competitor will likely accelerate profitability.

According to Montag-Girmes, the prospects for the airline are good and he flatly denies there is any time limit on his investment. “Sometimes fate helps a good company along and this is particularly the case at the moment with the additional traffic airBaltic is picking up from the re-routing of traffic from Moscow to Kyiv via Riga,” he says. “This is clearly beneficial for the company and sad as it may be for Estonians, [the disappearance of] Estonian Air is clearly also good news for the company, as are low fuel prices.”

“So the immediate outlook for the company, especially after it has been recapitalised, is very positive and I'm glad to be a party to that. I think there are some improvements in financial engineering and some aspects of ways in which the company is run that we can also bring,” he adds.

With the interview concluded and some small talk out of the way, Montag-Girmes opens his briefcase to put his papers away. Ranged along one of the dividers inside the bag are a dozen bulldog clips of various shapes, sizes and colours. Asked what they are for, he smiles: “I find I pick up an awful lot of paperwork – these help me keep it all in order. Plus it makes the people at the security checks really angry, which is quite amusing.”

Definitely not a baby-eater.