To offset the damage caused by the Covid-19 pandemic and help overcome the economic crisis, the government supported the increase of the fixed capital of the national airline airBaltic by 90 million euros today, August 17, which corresponds to the amount of financing required by the end of this year. With the planned listing of airBaltic shares on the stock exchange (IPO), investments will return to Latvia as income from the shares sold.
“This is a conceptual government decision - airBaltic will be able to receive funds after the European Commission has completed the state aid assessment procedure and provided a positive response,” stated Minister of Transport Tālis Linkaits. “AirBaltic is ready for growth, and the company has a powerful competitive advantage, that is, a new and modern fleet. It is crucial for the Republic of Latvia to develop the Riga International Airport as a Northern European aviation hub, and we will ensure that by supporting the national airline as well. With the onset of the Covid-19 pandemic, we responded quickly, and the European Commission also considered the support for the aviation sector as appropriate. If the pandemic lasts, the company must adapt and develop a business scenario that will allow the company to maintain and develop its operations in the new circumstances and return those actually lent funds to the state after listing on the stock exchange,” explained the Minister of Transport.
airBaltic is a strategic driver of the Latvian economy, providing more than 2.5% of Latvia’s gross domestic product. Due to the Covid-19 pandemic, the number of passengers carried by airBaltic decreased by 73% in 2020, with a significant adverse effect on the airline’s operations. The government has provided and continues to assist all sectors hit hard by the crisis to support the local economy.
With the onset of the pandemic in 2020, the airline implemented an ambitious cost-cutting scheme and retained more than 1,000 employees responsible for maintaining the company’s operations. The funding received in 2020 was used responsibly to keep the airline running and cover costs that could not have been avoided due to the Covid-19 pandemic.
State support for the aviation sector hit hard by the Covid-19 crisis is an essential precondition both for the industry to overcome the crisis and continue to operate successfully and for the development of the national economy as a whole. State support ensures the operation of state-owned enterprises in the aviation sector, and one will be able to assess the return on investment in the long run after overcoming the COVID-19 crisis when the situation in the industry stabilizes globally.
To overcome, mitigate, and curb the Covid-19 crisis, the government has supported an increase in the fixed capital of state-owned enterprises in the aviation sector by allocating 291.23 million euros in total to enterprises in the sector in 2020 and 2021.