European Commission Approves airBaltic’s €250 Million Bailout

The European Commission has approved vital funding for airBaltic to help its growth throughout the coronavirus. The Latvia-based airline announced on July 3rd that it would now receive €250m ($281m) in equity as the government ups its share in the airline.

passengers watch A220-300 airBaltic at Riga International
airBaltic has received equity from its government, which it will use for growth. Photo: Getty Images

€250m granted by EU Commission

Back in May, we reported that the Latvian government had agreed to support its flag carrier through difficulties resultant from COVID-19. airBaltic had managed to secure backing from its government for an investment that would be provided in tranches. The European Commission has now approved that agreed-to funding, and yesterday, airBaltic announced that it is set to receive €250m.

This new injection of financial capital will see shareholder values change within the airline. The Latvian government holds a majority stake in the airline at 80.05%. However, as part of the loan agreement, that share will rise to 91%. It means that Danish businessman Lars Thuesen will reduce his stake from 20% to 9%.

A220, airBaltic
As the government’s stake increases, airBaltic is in a better position for growth. Photo: Getty Images

What are airBaltic’s plans?

In a statement published on airBaltic’s website, CEO Martin Gauss reiterated the value of the investment. He said,

“The European Commission has concluded that the increase in airBaltic share capital will contribute to overcoming the economic consequences of the COVID-19 pandemic in the Latvian economy as a whole. At the moment, we are already on the path of recovery, and we greatly appreciate Latvian society and the government’s confidence in the future of the airline.”

airBaltic’s position is pivotal to the Latvian economy being the only scheduled commercial airline that the country owns and indirectly supporting 30,000 Latvian jobs.

As a result, airBaltic is hoping that it can use its new investment for future growth. Back in April, it set out its new five-year strategy addressing the issues of the COVID-19 impact. The plan, named Destination 2025 CLEAN, will focus first on reducing costs. Then, airBaltic will revise its operation for modernity and eco-friendliness. After that, growth will come.

How has the coronavirus affected airBaltic?

The grounding of its fleet and effective termination of scheduled commercial routes have not worked in airBaltic’s favor. The coronavirus has proved itself to be callous, and hardly any airline has come out unscathed.

A220 front view
airBaltic is now an Airbus A220-only airline. Photo: Getty Images

However, there have been some notable highlights within this period for airBaltic. For one, it saw a 500% increase in bookings in May, with 13,000 passengers flocking to secure tickets. Despite its issues and seeming dependence on a government bailout, it’s managed to resolve a lot of problems itself. The fact of the matter is that airBaltic looks as though it’s coming out of the coronavirus in a position of strength.

On July 1st, it resumed flights to London and announced a new route between Vilnius and Oslo at the end of May. With the youngest fleet in the world and a rebrand as an A220-only airline, it certainly seems that airBaltic will be able to deliver on the growth trajectory that it’s set out.

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