
Yesterday evening the airBaltic deal with Lufthansa as the new investor of the Latvian airline. Under the conditions of the agreement, airBaltic will be based in Riga, and the air service will not be reduced. The state still owns the majority shareholding of airBaltic. In exchange for investments of 14 million euros Lufthansa Group will receive a convertible share, giving it a 10 percent share. How did politicians and economists react to the deal?Minister of communication Kaspars Briskens in the program “Domska ploschad” said “in the current geopolitical situation to attract an investor of such caliber is a big luck. Lufthansa – a company with over more than 70-year history, its revenues are twice twice
the total budget of Latvia. Such a partner is good not only for airBaltic, but for all of our nation.” The former Minister of Communications Talis Linkates supported the signing of the agreement. “The deal confirms how important the national
airline and its place in the European aviation space. so and the correctness of the management’s strategy on the path to the primary public placement of shares (IPO),” said he. Commenting on the amount of the deal, Linkates stated that at this is not the most important. More important is the fact that Lufthansa decided to
join the capital of the company, to become an investor, and also to participate in the daily decisions in the Council of airBaltic. “The valuation of airBaltic’s value will be determined by IPO. Then we will see how valuable this Lufthansa contribution is, ” Linkeits added. Another former Minister of Communications Anrius Matisse said that
“the “deal with Lufthansa its self will not provide the growth of airBaltic, as it is for the development of the company.It is clear that the real value of the company is 140 million euros. We’ll see what will be further, as attracting such strategic investors could
increase the value of the enterprise.” In assessing Lufthansa’s participation in Lufthansa airBaltic in the size of 10% of convertible shares, Matisse noted that this decision was dependent on the investor. “This is a cautious step on their part, with consideration for the future, including IPO, as there is the opportunity to increase, and
decrease this participation.” Economist of Luminor Bank Peteris Strautiņš said that the amount of the deal could have been higher. “The estimate included in the deal is not pleasing if compared
with the previous investments by the government, but it is necessary to consider the significant positive impact of these investments on the economy. It is also important that the deal does make the most negative scenarios of the future less likely. At the same time it is important to ensure that the management of the company continues to consider not only its commercial interests, but and acted in the interests of the economy of Latvia, providing as widest possible route network “. Invest banker Girt Rungainis in an interview with
Latvian radio said that Lufthansa paid as much as it considered fair. “This was what the negotiation process was achieved within the need to ensure the future development of the company. Lufthansa paid what it considers fair, taking into account the different scenarios of development. What the Latvian state got is closer to the best that could have been obtained. Some certainly could, without knowing the context,to appeal to what historically has been invested [in airBaltic], but it doesn’t make sense. “I think the amount is adequate,” said he. The head of SEB Investment Management Janis Rosenfelds said that the deal with Lufthansa
gives positive signals to other potential investors. According to Rosenfelds, the price and conditions of the deal say that, that Lufthansa is currently estimating the value of airBaltic in the range of 140 to 280 million euros. At the same time he noted that Lufthansa is a strategic investor, which recently extended another three years the contract to lease airplanes with
crews to airBaltic. In his view, such long-term contract for strategic investor is most likely to be worth more than 14 million euros. The expert also remembered that the world aviation industry has been facing
serious challenges for decades, and the opportunities for profit in this business are limited. As an example he cited Lufthansa’s shares, which are now trading on the exchange at the same price, as was in 1995 year and in the last 12 months investors in these bonds have lost about 15% of the
value. Economist of Citadele Carlis Pourgailis said to the agency LETA, that the agreement of the national Latvian airline airBaltic with the German aviation group Lufthansa Group could be compared with the last rescue circle on the background of the financial problems of airBaltic . According to his words, in view of the complex financial position of airBaltic, the attraction of a strategic investor in
together can be considered as a positive event, because it will ensure the future existence of the company and the possibility of conducting the primary publicHowever, the price of the deal, according to the expert, is very low, and the received 14 million euros does not improve the financial situation. “If airBaltic prepares properly
forIPOand,especiallyimportant,potentialinvestorsbelieveinthebusinessprospectswithLufthansa,thevalueofthecompanywithIPOcouldbesignificantlyhigher,” Purgailis said.