'Temporary' airBaltic investor approved - but Transport Minister for the chop

Prime Minister Laimdota Straujuma on Wednesday demanded the resignation of Transport Minister Anrijs Matiss, just hours after a marathon cabinet meeting appeared to have thrashed out a controversial deal to invest in national airline airBaltic.

According to Straujuma's spokeswoman Aiva Rosenberga, Straujuma is dissatisfied with Matiss' efforts to plot the airline's future.

"The minister has lost my confidence," Straujuma was reported as saying by the LETA newswire.

After a four-hour discussion behind closed doors on Tuesday, the government agreed to invite German entrepreneur Ralph Dieter Montag-Girmes to invest €52 million in airBaltic with the government stumping up a further €80 million.

Straujuma said that the solution would be temporary while the Transport Ministry continues efforts to find a long-term strategic investor for the company.

However, Matiss described the deal as "the best of bad options" amid question marks over Montag-Girmes' long established ties with Russian banks and other companies, including in the aviation sector, plus a suggestion that airBaltic would have to buy Sukhoi planes as a condition of investment.

"As for the government money - initially it will be a loan from the Treasury. After that, a decision will have to be made on the loan's capitalization. This will not affect the budget deficit because it is an investment in capital, and of course it significantly increases the value of airBaltic," Matiss said, assuring the press that the European Commission would not raise objections to such investments as they would not be classed as state support.

In mid-October, the Latvian government said it needed more information about the potential investor of Latvia's airBaltic carrier found by the Prudentia consultancy - which itself has an increasingly rocky relationship with government.

An auditor, hired by the Transport Ministry, warned that a solution to airBaltic's financial issues is urgently needed to ensure the company's stability.

Prudentia, a consultancy hired by the Latvian government to find an investor for airBaltic, announced in September that it had found a Western investor, ready to invest an estimated 50 million euros in the Latvian carrier, and that the government would have to provide 80 million euros.

Prudentia also warned that if airBaltic does not receive financing fast enough it might become unable to meet its payments to Canadian company Bombardier and that as a result airBaltic might lose the money paid in advance for Bombardier aircraft.

After these announcements, the Latvian government terminated its contract with Prudentia accusing it of breaching confidentiality terms.

airBaltic, founded in 1995, is 99.8 percent-owned by the Latvian state and serves over 60 destinations from its home base in Riga.

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