AirBaltic’s strategic target will remove the strategic expansion function outside Latvia / day

The annotation of the MoU amendments states that the aim is to determine and update the strategic objective that is in line with airBaltic’s business development direction and the Sustainability Plan in connection with the progress of the initial public offer and the decisions required for its implementation.

The airBaltic route network is based on transit traffic through the Riga Airport, which provides a greater number of direct flights to Latvia. It strengthens Latvia’s position in the Baltic aviation market and promotes investment.

The MoU explains that the number of passengers carried by the airline and flights carried out increased last year. The average seat filling is also improved. However, both airBaltic and the parent company completed last year with very much loss. Taking into account the negative financial figures, it is necessary to clarify the strategic objective of the company, emphasizing the need to operate on commercial and sustainable principles.

In the SM, the term « sustainability » contains the principle of commercial activity, competitiveness and profitability. The Cabinet Order draft highlights the need for airBaltic on the basis of the principles of commercial activities, which directly indicates the shareholder’s desire to focus on the principles of economic sustainability.

Based on the current situation, airBaltic’s overall strategic goal is set as follows: « By working on commercial and sustainable principles, ensuring the competitiveness and profitability of the airline, promoting Latvia’s international reach, ensuring passenger and freight aircraft, thus contributing to Riga as an important development of Northern European Air Traffic Center ».

The current airline in the context of strategic development, taking into account market development, geopolitical risks, and the preparation of the company for raising capital, emphasizes the need to focus on the sustainability of the company, which includes profitability and competitiveness.

For this reason, aspects related to the company’s strategic expansion function outside Latvia are deleted from the previous goal to more accurately focus the shareholder’s task for the company for priority development and the increase in the value of the company in the long term. At the same time, the company will continue to retain flexibility to use commercial opportunities in other markets, such as the development of full service rental services, but it is no longer defined as a strategic objective at national level.

By approving the overall strategic objective of airBaltic, the shareholder will properly develop the shareholder’s expectation letter, which must promote the future sustainable development of the company, including the profitable business and the successful development of capital in the financial markets.

It has already been reported that in the first quarter of this year, the airBaltic group had a loss of EUR 29,348 million, which is 27.8% less than in the first quarter of 2024, but the Turnover of the Group increased by 0.3% to EUR 132,719 million.

In 2024, the airBaltic Group worked with audited losses of EUR 118.159 million, as opposed to profit a year earlier, but the Group turnover increased by 11.9%compared to 2023, reaching EUR 747.572 million.

Currently, the Latvian state owns 97.97% of airBaltic shares, while financial investor, Danish businessman Lars Nuten, owned by Aircraft Leasing 1 – 2.03%.

However, at the end of January 2025, an agreement was reached with the German airline Lufthansa on investment in airBaltic in the amount of EUR 14 million. In exchange for the investment « Lufthansa Group » will receive convertible shares, which will give it 10% participation. Later, at the potential airBaltic’s initial public offer (IPO), these convertible shares will be converted into ordinary shares.

After the IPO Lufthansa Group participation, the potential IPO market price will be determined. The deal also stipulates that Lufthansa Group will be at least 5% of airBaltic’s capital after the potential IPO. Similarly, the Latvian government agreed on August 30, 2024 that the country should retain at least 25% plus one share, following the capital of the airBaltic IPO.

This transaction has yet to obtain permission from the German Federal Cartel Bureau (« Bundeskartellamt »).