Latvia wants to relaunch airBaltic as regional flag carrier

By bne IntelliNews June 18, 2015

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The Latvian government plans to privatise a chunk of airBaltic within the next five years, the national airline's CEO announced on June 17. Riga suggested neighbours Estonia and Lithuania buy into the company to create a regional 'flagcarrier'. 

Martin Gauss spoke of the need to attract private capital to push the development of airBaltic, which has battled through some very tough years. However, earlier in the day, Latvian Transport Minister Anrijs Matiss hinted Tallinn and Vilnius could chip in. 

The airline needs more passengers to expand its route network, the official noted, according to BBN. That can only be achieved by tapping the markets of all three countries, he suggested. 

"We have consulted with our Estonian and Lithuanian colleagues on this matter unofficially, but received no response," Matiss said. Adding that Riga will also sound out foreign investors, the minister noted: "We are prepared to negotiate on stake sizes, who will get how much. But the majority stake, or at least 51%, should remain in the hands of the Baltic states." 

The idea for a common Baltic region airline is not new. Lithuania has suggested clubbing together several times in recent years. It resurrected the topic in May, after its latest effort to reintroduce its own flag carrier - Air Lituanica - crashed just a couple of years in. 

"The three Baltic countries should take a common approach to their aviation," CEO Gauss agreed at the time. 

Flag carriers across Europe have been struggling in the face of competition from budget airlines and the economic crisis, with EU rules on state aid and ownership not helping. However, tied up in the difficult financials of the industry are the emotive, patriotic issues connected to national airlines. 

On top of that, the history of pan-Baltic undertakings suggests the trio will struggle to get a regional flag carrier off the ground. The neighbours have struggled for years to get vital joint projects, such as the Visaginas nuclear power plant, or regional railway project Rail Baltica moving as they bicker over costs and locations. 

Despite the added incentive of rising geo-political tension, the three singularly fail to cooperate on energy, leaving them more dependent on Russia than necessary, noted PISM in a recent report. "Despite successive political declarations by the Baltic states to create a common energy market, in practice their cooperation is illusory," the analysts state. 

Estonia quickly exhibited the sort of spiky attitude that marks the approach to regional projects as it responded to Riga's suggestion they fly together. 

"Acquisition of a holding in an airline would be a decision that must be very well analysed in advance," sniffed a spokesperson for the economy ministry, who also noted Latvia has made no official offer to Tallinn. "Moreover, Estonia has its own national airline in operation." he added. 

Following airBaltic's tough restructuring over the past few years, Estonian Air is the weaker of the two surviving Baltic flag carriers. It reported a loss of €6.4mn in 2014, more than double the hole forecast. 

Meanwhile airBaltic boasted profit of €10.6mn, a five-fold increase y/y and a remarkable turnaround on losses in 2011 and 2012. Matiss refused to answer when asked if Riga's plan would suggest Estonian Air should be shuttered. 



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