The Estonian government has rejected an offer to acquire a shareholding in Airbart as it seeks to improve connectivity from the capital's Tallinn Airport.
Latvian Ministry of Transport announced in June that it would take a formal approach to the Estonian and Lithuanian governments and airports, inviting them to participate in the first public call for Air Barth.
Transport Minister Atis Svinka said all three Baltic countries benefited from having “one powerful aviation market player”.
Investments from Estonia and Lithuania will “improve the IPO story” for Airbarth, he added.
Air Baltic has already secured the Lufthansa Group as an investor and is intended to provide similar terms to representatives of the Baltic countries.
However, the Estonian Climate Ministry, which oversees various sectors, including transportation and energy, said the government “decided not to acquire stakes in the airline's Air Baltic at this stage.”
He says he was offered stock “on the same terms” as Lufthansa. This has acquired a 10% convertible shares and will hold at least 5% of the Air Valt following the IPO.
“Acquiring Airbarth's stock is a critical decision that will have a long-term impact on the country's air connections, transportation infrastructure and the country's financial efficiency,” said Kurdar Rei, Estonian Minister of Infrastructure Structure, jointly heading the Ministry of Climate.
“In order to make such an investment, the country must have a very clear picture before that.”
Ray shows Air Baltotic is still in liquid state, with recent senior management changes – long-term Martin Gauss resigning after a lackluster vote, and its financial results are still “stabilizing.”
Pauls Calitis, interim chief of Air Baltit, admits that the beginning of the year has been “challenging” as airlines face yield pressure and fuel price volatility.
However, he was optimistic in the second quarter based on preliminary data, improving unit revenue, yield and load factors.
“Operating metrics, including engine availability, continued to meet our expectations,” he says. “With the promising summer demand, we are in a good position to further strengthen the role of Airbart in our core market.”
Chief Financial Officer Vitolds Jakovlevs adds that the third quarter points forecast will be a “active trend” in unit revenue performance, despite forecasts that passenger numbers will decline slightly “in line with planned cuts in capacity.”
However, the Estonian government is not convinced yet.
“Estonia cannot acquire shares based on current offers,” says Infrastructure Minister Ray. “Once you have a clear business plan, you can reconsider your stock purchases.”
While Airbarth, which has a market share of nearly 30% in Tallinn, has said it is a “significant strategic partner,” the government's immediate focus is to promote connectivity by supporting the development of airport infrastructure, including passenger terminals.
“The goal is to create a favorable environment where air connections and passenger numbers can grow, which will support the Estonian economy more widely,” he said.
As part of its investment plan announced in the fourth quarter, Estonia aims to enhance its appeal as a regional connectivity hub in Tallinn with a route development program and a freeze on airport fares for the next three years.
“This will result in an airline that includes Airbalt, a clear and positive signal to expand its operations in Tallinn,” the Department of Climate says. Under the investment plan, Tallinn's passenger terminal (capacity limit has been reached) will be expanded.
