airBaltic restructuring gets EC thumbs-up

Take note – story published 9 years ago

The European Commission (EC) has approved measures taken by Latvia to help its national airline airBaltic overcome financial difficulties the carrier has been facing since 2008. 

The EC ruling announced Wednesday finds no fault with Latvia’s compliance with EU state aid rules and concludes that "airBaltic’s restructuring plan will allow the company to become viable in the long term without unduly distorting competition in the Single Market.”

The EC has been looking in-depth into questions concerning Latvia’s 2011 loan worth 16 million lats (€22.65 million euros) to the 98% state-owned stock company, the interest on which was reduced just two months after it was granted. The examination of the passenger carrier’s financial records also focused on the 0%-coupon bonds issued by airBaltic in 2010, as well as various bank transfers that were made to the company by the state around that time.

However, the EC’s announcement says “these measures were carried out on market terms, they procured no undue economic advantage and therefore do not involve any state aid within the meaning of EU rules.”

Neither did the EC find any fault with Latvia’s aid measures to airBaltic taken outside of market terms, ruling that no distortions of competition were felt from the company’s rescue program. It sees in Latvia’s 5-year restructuring plan (2011-2016) “a reliable basis for airBaltic’s return to long-term viability within a reasonable timescale.” The EC also agreed that airBaltic’s forfeiture of some routes and flights helped persuade the Commission’s experts it avoided enjoying unfair advantages from its state aid package.

Finally, the EC report is satisfied that airBaltic itself “contributes to the costs of restructuring by securing several private financial injections and loans and a lease agreement for new aircraft.”

The ruling is a boon to both the airline itself and government plans to eventually sell it off, removing one key area of uncertainty as far as any potential buyers are concerned.

airBaltic chief executive Martin Gauss, who has successfully turned the company around in recent years, welcomed the EC ruling.

"We welcome the approval of the Restructuring Plan by the European Commission because it offers legal certainty for our industry partners and investors," Gauss said in a statement.

airBaltic achieved a net profit of €1m in 2013 after a €27m loss in 2012.

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