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Indecision is final on airBaltic deal

The increasingly farcical situation involving whether or not the government supports its own decision to back an investment plan for national airline airBaltic reached new levels of confusion Tuesday with Prime Minister Laimdota Straujuma saying other options were available but refusing to say what they are.

When asked by the press after a cabinet meeting what would happen if the government backtracked on its decision about the financial investor for airBaltic and the Latvian parliament did not approve an 80 million euros loan to the airline to augment the financial contribution by the investor, the prime minister said that it would not result in an international investment dispute because the agreement with the investor had not yet been signed.

"In that case we will have to look for a different solution,” she said. The Transport Ministry has already been instructed to look for a strategic investor for airBaltic - a task that has already been running for two years - and there are some other options, the prime minister said, refusing to elaborate on any of those options.

Solvita Aboltina, the chairwoman of the ruling Unity party, told the press after Unity's board meeting on Monday that, considering the objections that other ruling coalition partners had raised to a loan that the government is to grant to airBaltic, legal experts would have to see whether the government’s decision about the airline’s new investor is final.

She said Unity’s partners in the ruling coalition – the Greens and Farmers Union (ZZS) and the National Alliance – had raised objections to an 80 million euros loan that the government was to grant to airBaltic alongside with the financial contribution to be made by the new investor. ”For this reason, we will ask the legal experts to look for a solution and determine whether the decision is final,” the Unity leader said.

After more than four hours of debating, Latvian ministers at a closed Cabinet sitting on November 3 approved the financial investor for Latvia's airBaltic carrier, German businessman Ralf-Dieter Montag-Girmes, who will invest 52 million euros in the company, while the Latvian government is to contribute 80 million euros, planned in the form of a loan to the national airline from the Treasury which would be capitalized afterwards. The above investments will provide the airline with positive equity of about 60 million euros, enabling the company to borrow in financial markets to ensure its future growth.

A company founded by the investor in Latvia will acquire a 20 percent stake in airBaltic and that the government will have the right to buy out these shares when the strategic investor is attracted. The exact terms of the shareholder agreement still have to be negotiated.

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