Minister says Latvia to buy airBaltic stake back from SAS

By bne IntelliNews September 10, 2008

Mike Collier in Riga -

Never a man to mince his words, Latvia's energetic transport minister, Ainars Slesers, tells bne that the Latvian government will buy the 47% stake in airBaltic currently owned by SAS - despite the official government position still being undecided. Furthermore, he jibes, the Scandinavian airline could do worse than let itself be acquired by airBaltic, whose management could teach the struggling airline a thing or two about how to be profitable.

"I believe that we will buy out SAS very soon," Slesers told bne at the European Airport Development Conference being held in Riga on September 9 and 10. "As soon as we get a proposal, I think we will make a decision that we will buy out SAS," Slesers continued, explaining that the Latvian government would take up its first-refusal option on SAS's stake despite the likelihood that such a move would meet with stiff opposition from a public being told to tighten its belt.

Slesers refused to name a price, but clearly thinks he can win complete control of the airline at a bargain price; SAS' value has fallen by roughly 68% over the past year. "AirBaltic is our national air carrier so we are ready to pay some money to SAS - not very much, but a reasonable, proper price," he says.

Turning the tables

Slesers is clearly enjoying the opportunity to turn the tables on SAS, whose decision to sell up a few weeks ago the minister only learned from media reports. The news broke in Stockholm on August 14 when SAS spokesman Mikael Lindberg was asked by Reuters if SAS would sell its minority holding in airBaltic. "I can confirm that," came the brief but informative reply. SAS, say analysts, is clearly frustrated by the Latvian government's refusal to privatize airBaltic and were angered by previous disparaging comments from Slesers, who said that AirBaltic would develop more successfully without SAS as the big brother.

Pressing home the point, Slesers even suggested to bne that SAS might benefit from being taken over by airBaltic to teach them about operating a profitable airline. "If prices will go down for SAS even more, probably we would consider buying up SAS and taking their management apart because their management today is not very good. I believe our management would be much better and we really would be able to take over their business." He insisted he wasn't joking, and cited the precedent of Estonian ferry company Tallink buying out Finnish rival Silja for €447m in 2006. SAS' shares in airBaltic are probably worth around €50m.

Slesers cheekily suggested his own business plan for the pan-Scandinavian carrier. "I have talked with the ministers in Scandinavia, I told them what I think. The only way for SAS to survive is to split the airline into three parts... they are not anymore able to work from three hubs. They have to have three airlines which compete with each other." Earlier, Slesers outlined ambitious plans to turn Riga airport into a major regional hub with a €500m investment that is currently being tendered by five companies.

Of course, ministries like that of Slesers are supposed to be looking for ways to cut expenditure, but the self-styled "bulldozer" of Latvian politics thinks the purchase of SAS shares and the huge airport investment make economic sense, even in the current economic climate. "In a recession where many airlines will struggle to survive, we will see the biggest growth in our history," he says. "People don't make money when things are stable - they make money when things are going not so well. Somebody is losing and somebody is winning. I really think next year will be the best for Riga airport and Latvia because we are making business for the whole country." In Slesers' opinion, Riga's situation has parallels with Frankfurt after World War II when a decision to turn it into an aviation hub stimulated its emergence as a major financial centre.

Despite a reputation for sometimes letting his mouth run away with him (even his harshest critics would admit that he is an excellent off-the-cuff speaker) and being generally unpopular with the electorate, Slesers has a reputation for getting things done. The improvements already witnessed at Riga airport are undeniable and you wouldn't bet against him putting into reality his vision of a new terminal where Russians who "love to buy expensive things" can acquire tax-free Rolex and Cartier watches.

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Minister says Latvia to buy airBaltic stake back from SAS

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