An agreement has been reached that German airline group Lufthansa Group will become a strategic investor for Latvian airBaltic airline. Lufthansa will acquire minority participation in this airline for EUR 14 million, according to the statement by airBaltic.
According to the above-mentioned statement, an agreement has been signed between the Latvian Ministry of Transport, airBaltic and the Lufthansa Group, which provides for the investment of EUR 14 million from Lufthansa to airBaltic for minority shares. The investor will also receive a seat on the Council of airBaltic.
In exchange for the investment, “Lufthansa Group” will receive a convertible share, which gives it a 10% stake. It will be issued at a subscription price of EUR 14 million. After the potential initial public offering or IPO of airBaltic’s shares, this convertible share will be converted into regular shares. After the IPO, the size of Lufthansa Group’s participation will be determined by the potential market price of the IPO, explained in a statement distributed by airBaltic.
The aforementioned investment transaction also foresees that Lufthansa Group will own not less than 5% of airBaltic’s capital after the potential IPO.
The deal is a continuation of the existing strategic partnership between Lufthansa Group and airBaltic. The completion of the transaction is planned for the second quarter of 2025 after the assessment of the competition authorities.
The deal provides airBaltic with additional financing and supports its growth plans, which include the expansion of wet lease agreements, as well as confirms airBaltic’s leading market position and unique hybrid business model. At the same time, Lufthansa Group’s role as a strategic partner of airBaltic is also being strengthened, the company said in a statement to the media.
Prime Minister Evika Siliņa (JV) wrote on X (formerly Twitter) that Lufthansa Group is an internationally highly regarded company in the aviation sector, and this will provide a good springboard for airBaltic’s growth and also for attracting additional capital.
The terms of the agreement stipulate that the company’s base remains in Riga and flight connectivity does not decrease, and the majority of airBaltic’s shares remain in state ownership, said the PM.
In an interview to LTV programme Panorāma Siliņa mentioned that the contract provides the option for Lufthansa Group to expand its participation in airBaltic by acquiring additional shares.
At the same time, she stressed that the country wants to maintain its participation in the airline and future investments should be expected. “The aim is to allow airBaltic to go through the IPO process so that private investors from outside can also invest private financing and raise the airline’s value together with the state,” the head of government explained.
Commenting on whether the state has reserved additional funds to invest in airBaltic, Siliņa pointed out that, at the moment, only the money already lent to airBaltic is reserved, but no other additional funds for the future investment are reserved at this time.
Minister of Transport Kaspars Briškens told TV3 News that this is a major and long-expected event that will enhance airBaltic’s value. It provides future development opportunities, allowing the company to move towards attraction of new development capital.
The minister said that the moment a Lufthansa Group representative enters the Council of airBaltic, there will be a joint move forward towards the listing of shares on the stock exchange. At the same time, opportunities will also be sought to further develop cooperation not only in terms of strengthening the connectivity of Latvia, but also in terms of leasing out aircraft, which has been successfully implemented so far.
When asked to reveal the behind-the-scenes details of the deal, Briškens told TV3 News that it took months to conclude the contract, but the most active talks had been going on since fall. “An agreement on the texts of the deal was reached, but I have to admit that the conditions at the beginning of January caused such a certain slowdown in the process. But we managed to convince our partners that the Latvian state stands very firmly behind our company. The Latvian state is also committed to maintaining at least 25% of the participation in this strategic company in any scenario, including when the issue of shares on the stock exchange or any other capital raising processes will take place,” the minister confirmed.
According to him, as a strategic partner, Lufthansa Group sees and understands that the future of airBaltic is important to Latvia.
When asked whether this deal has solved airBaltic’s financial problems or whether the state still has to take into account that large sums of money may still have to be invested in this company in the future, Briškens replied that to ensure future development, airBaltic needs capital that will have to be raised. He said this will not be a difficult task with Lufthansa Group’s backing.
The politician added that once the deal is sealed, both sides will continue the previously signed deal on the lease of airBaltic aircraft to Lufthansa Group.
For a long time Briškens remained silent whether Lufthansa Group is a potential strategic investor, nor did he say how many shares of airBaltic and for what amount could be sold to the investor.
airBaltic carried a total of 5.2 million passengers in 2024, up 13% from the year before, and 47,000 flights, up 7% from the year before.
The audited turnover of airBaltic in 2023 was EUR 664.289 million, which is an increase of 33.2% compared to 2022, as well as the company made a profit of EUR 33.852 million as opposed to losses a year earlier.
Latvian state owns 97.97% of shares in airBaltic. Aircraft Leasing 1, which is owned by financial investor, Danish businessman Lars Thuesen, owns 2.03% of shares.