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The shockwaves from the implosion of Lithuania's Snoras Banka and subsidiary Latvijas Krajbanka have hit Latvia's national flag carrier airBaltic, with the government buying out a 47.2% stake in the airline from Baltijas Aviacijas Sistemas (BAS) because the minority shareholder, which was backed by the two banks, cannot now honour an agreement to increase airBaltic's share capital.

The Latvian Transport Ministry bought the shares at their nominal value of LVL224,453 (€321,591), despite earlier reports that under the shareholder agreement it would have the right to pay just LVL1. The state now holds 99.8% of airBaltic, but is left to fully fund the share capital increase of LVL107m.

The state has been tussling with BAS over control of the airline for some time, with suspicions that Vladimir Antonov - majority shareholder in Snoras and now on bail in the UK after being detained on an international arrest warrant on charges of asset-stripping at the banks - was in fact also secretly behind the Bahamas-based company. The Latvian government finally cemented its control over airBaltic in the autumn, however, agreeing to the increased investment with BAS - and Snoras and Krajbanka - on October 3.

However, with Antonov's two banks as its only creditors, BAS was unable to state clearly during an airBaltic shareholders meeting if it had the necessary funds for the share capital increase, due on December 15, Transport Ministry State Secretary Anrijs Matiss told reporters on November 30.

The Transport Ministry has noted that the agreement on the share capital increase is still valid, and has promised that the state will continue to invest money in the airline in accordance with the airBaltic business plan, reports Leta. However, the ministry adds that the business plan is to be reviewed at the next meeting of the government.

Meanwhile, the price paid for the stake looks like it could be a surreptitious route for the government to channel funds to cover the losses at Krajbanka, given that in the shareholder agreement, according to Pietiek.com, the state had the right to buy out BAS for just LVL1 should it fail to honour its liabilities. As Leta reports, Krajbanka's income from the sale of the stake will be used to help pay state-guaranteed compensation to depositors. The governments in both Latvia and Lithuania have insisted from day one of the banking drama that no state money would be needed to clear up the mess.