December 3, 2015 / 12:02 PM / 3 years ago

UPDATE 2-Latvian parliament approves AirBaltic cash injection

(Adds comments by financial investor, context)

By Gederts Gelzis and Tim Hepher

RIGA/PARIS, Dec 3 (Reuters) - Latvia’s parliament approved an 80 million-euro ($85 million) cash injection for AirBaltic on Thursday, lifting a potential hurdle for the state-owned airline to complete the acquisition of CSeries passenger jets from Canada’s Bombardier.

The green light follows a government decision to prevent the state-owned airline separately importing jets from Russia’s Sukhoi, a possibility that had threatened to put the airline at odds with the Baltic state’s hawkish policy against Moscow.

The state infusion is part of a refinancing plan that also involves 52 million euros of private investment from German banker Ralf-Dieter Montag-Girmes, in return for a 20 percent stake in the last surviving Baltic flag carrier.

The arrival of an investor with lengthy experience in Russia had triggered speculation that Latvia could import Russian jets, putting approval for the refinancing at risk.

Montag-Girmes, who has denied any pro-Russian bias, told Reuters on Thursday his decision to purchase a stake was “completely independent” of fleet decisions.

Officials said the possibility of purchasing Russian jets had nonetheless been taken off the table.

“AirBaltic has altered its business plans and will substitute Sukhoi Superjets (with) Bombardier planes, and all the finances will be covered,” parliamentary budget committee chairman Karlis Sadurskis told Reuters.

Facing falling demand, AirBaltic hopes to use the Bombardier jets to make the Baltic an alternative East-West hub.

Its geography puts it in reach of destinations as far afield as China or Africa based on the range of the 110 to 130-seat jets, which have a list price of $70 million apiece.

Industry sources say it is also looking for five small regional jets, attracting interest from Canada, Brazil, Japan and Russia.

Its plans had been under threat without plugging a 170 million-euro hole in its balance sheet, and under EU rules it could only get state help if it obtained private investment too.

The funding wrangle had increased the uncertainty over AirBaltic’s ability to complete its acquisition of 13 CSeries jets, a deal that is also important for recently struggling Bombardier.

Calling himself as an “opportunistic” investor who had been impressed by Chief Executive Martin Gauss on a chance meeting at the Paris Airshow, Montag-Girmes said he was open-minded on the future of his AirBaltic stake but that it had no “sell-by date”.

“I like the management team. A lot of painful work has been done through three years of restructuring,” he told Reuters.

“There is a good little niche in Riga with the combination of frequencies and ease of use, and the fact that Tallinn and Vilnius are open to all comers...It is a very interesting investment opportunity and a very good cost base.” (Reporting by Gederts Gelzis,; Editing by Niklas Pollard and Mark Potter)

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