Latvia transport minister jettisoned without parachute as airBaltic encounters turbulence

By bne IntelliNews November 4, 2015

Mike Collier in Riga -

It will go down in the history books as a resignation, but in reality Latvian Transport Minister Anrijs Matiss was unceremoniously sacked by Prime Minister Laimdota Straujuma on November 4, just hours after her government agreed a Ministry of Transport plan to provide a cash injection to national airline airBaltic without falling foul of strict EU laws on state support.

That deal centres on taxpayers giving an €80m “loan” to the airline, while German investor Ralf Dieter Montag-Girmes chips in €52m of his own money as a “temporary” investor and efforts continue to find someone with even deeper pockets to become a long-term “strategic” investor.

The deal was thrashed out behind closed doors in a four-hour cabinet meeting on November 3 that was also attended by the heads of Latvia's internal and external security services. Why the spooks? Mr Montag-Girmes is a colourful character to put it mildly, with longstanding links to various companies in Russia including banks and the Sukhoi aircraft manufacturer. Coincidentally, airBaltic started talking recently about buying Sukhoi planes to tide it over until a promised fleet of new Bombardier planes arrives.

Montag-Girmes is an Oxford graduate and worked as a translator during a stint in the West German military. In 1998, he acted as a consultant attempting to trace and recover billions that went missing in the collapse of Russia's Inkombank and has spent the time since developing ties with Russia's aviation industry.

Public records show that in December 2014 he registered a series of aircraft leasing companies in Latvia. Apparently, he's also bought a defunct Lord of the Manor title in Norfolk, England as a means of impressing the neighbours.

Scapegoated

After sleeping on the deal, Prime Minister Straujuma woke up on November 4 and demanded Matiss' head on a plate – or at least resignation – without giving a clear reason except the vaguest notions that she was unhappy with his work plotting the future of airBaltic.

“The reason for requesting the resignation of the Minister is that he has not informed the government in a timely manner about the necessary actions with regard to national airline airBaltic as well as a lack of supervision of the airline's strategic direction,” said the official notice from Straujuma's office.

However, the real reason is likely to be Matiss' own lack of enthusiasm for the deal that he was forced to lay on the table, as well as the doubts he expressed in private to reporters about Montag-Girmes' suitability as an investor.

Consultancy firm Prudentia, which until recently was regarded as virtually the in-house consultancy firm of the Unity political party to which both Matiss and Straujuma belong, had come up with Montag-Girmes name and strenuously pushed the deal over Matiss' reservations. With no other potential investors to choose from, the government was faced with a stark choice: reject the deal and watch airBaltic run out of cash with all the political fallout the collapse of the airline would cause, or accept the deal, kick the can down the road and then make Matiss carry the can in case it all goes horribly wrong.

Straujuma appears to have chosen the latter option – a feeling reinforced by watching her perplexing performance in a press conference on November 4 in which she revealed Matiss had talked about resigning two weeks earlier. “What the government agreed last night was the transport ministry's responsibility,” Straujuma said. “There were various options and as you saw, the decision was very complex.”

Peppered with questions about the airBaltic deal, she was remarkably evasive. “I understand you want me to say if I support this investor or I don't support this investor. I don't want to talk about the investor, but about the importance that this company finds a strategic investor and that the company can be supported. At the moment, the fact is we support having a financial investor for two years while we find a strategic investor. The main thing is to find this strategic investor,” she said, before beating a hasty retreat.

Yet in a way the prime minister should herself shoulder some of the blame. airBaltic is routinely presented as a remarkable success story: an airline that survived while its counterparts in Estonia and Lithuania went bust, and a company that under German chief executive Martin Gauss had performed an amazing turnaround in a few years from huge losses to modest profit.

The sudden revelation of how vulnerable the company remains despite the good work of Gauss and his team has had the shocking effect of opening the window at 30,000 feet. All the feelgood factor has been sucked out in an instant, leaving Straujuma desperately fastening her safety belt and using Matiss to fill the hole until normal cabin pressure is resumed.

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