The valuation of the Latvian airline airBaltic in a transaction which will allow the German Lufthansa Group to become a strategic investor in the Latvian flag carrier is not encouraging, but it may have an indirect positive impact on the economy, and that should be taken into account. This was stated to the LETA news agency by economist Peteris Strautins at the Luminor Bank.
Strautins says the valuation of the airline in the transaction is less than impressive when compared to Latvia’s previous investments into the company, adding that such previous decisions must be evaluated on the basis of information that was available when they were made.
Had it been possible to foresee events such as the outbreak of the Covid-19 pandemic or the war in Ukraine, Latvia’s policy toward aviation would have been different, Strautins argued.
“It is important that this deal will make worst-case scenarios less likely,” the economist said.
Strautins welcomed the fact that progress has finally been made on this issue, because airBaltic needs to be transferred to the private sector, and its shares must be listed on the stock exchange. Attracting a strategic investor is an important part of the process.
“At the same time, however, it is important for the company’s management to continue to take into account not just its financial interests, but also how it will serve the interests of Latvia’s economy by providing the widest possible network of flights,” the economist said.
Latvian Prime Minister Evika Silina announced on X on Wednesday that the agreement had been reached and that a contract had been signed with Lufthansa as the strategic investor for the Latvian flag carrier.
airBaltic said in its own statement that the agreement was signed by the Ministry of Transport, airBaltic and the Lufthansa Group. Lufthansa will invest EUR 14 million in airBaltic for a minority stake in the airline and a seat on the airline’s board.
In return for the investment, the Lufthansa Group will receive a convertible 10% stake in the company, which will be issued at a subscription price of EUR 14 million and converted into ordinary shares once airBaltic goes through an IPO. At that time the group’s share will be determined by market pricing, but Lufthansa’s share in airBaltic will amount to no less than 5%.
Source: BNS
(Reproduction of BNS information in mass media and other websites without written consent of BNS is prohibited.)