Latvian government approves airBaltic investment plan

By bne IntelliNews November 20, 2015

The Latvian government finally approved on November 19 the controversial investment plan for flag carrier airBaltic. The cabinet reportedly amended the deal to insure itself against any fallout, with the issue having already accounted for the transport minister.

A special cabinet session removed controversial points and inserted new clauses to state that Ralf-Dieter Montag-Girmes - the German investor with strong Russian links that is looking to put €52mn into the airline in return for a 20% stake - will be responsible if it turns out any international sanctions have been broken under the deal, Prime Minister Laimdota Straujuma said, according to LSM.LV.

Under the deal, floated last month, Riga - which currently holds 99.8% of the airline - will pump €80mn into airBaltic alongside the German. Montag-Girmes links to the Russian aerospace industry has drawn huge attention to the deal.

"The decision [to let Montag-Girmes in airBaltic] is a short term solution, and the government's aim is to find a longer-term strategic investor," Straujuma told reporters.

However, airBaltic CEO Martin Gauss told bne IntelliNews on November 17, that Montag-Girmes is the long-term solution. The government has been seeking an investor for the national carrier for some time. The airline, at risk of being grounded a few years ago, has overcome immediate crisis, but Riga has been warned it needs to move fast to strengthen the company and expand its operations into neighbouring Baltic markets in order to make it more attractive. 

The ball is now in parliament’s court, which still needs to approve it. That is no formality, however, given the controversy, as well as the strains in the governing coalition. Transport minister Anrijs Matiss already fallen victim to the plan, his lack of enthusisam for Montag-Girmes as “the best of bad options” apparently infuriating Straujuma.

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