Once again, the situation regarding airBaltic (AB), the ruling coalition discussed on Monday, but did not decide on the change of the airline’s management and will wait for the decisions of the shareholders’ meeting. The facts are that the shareholders have trusted AB’s management, their business plan and allocated the resources that management has requested. Management has promised to raise additional capital by issuing airline shares on the stock exchange. In addition, management has agreed and recognized as reasonable the bond issue and coupon rate beneficial to AB’s business and shareholders. Last May, AB issued five-year and three-month secured bonds in the amount of EUR 340 million with a high interest rate of 14.5%. After that, an additional issue was implemented in October, the total volume of the issue reaching 380 million euros.
At this point, it might have become clear that there are not enough resources, the initial issue of shares in the stock exchange will not take place within the promised terms, additional capital will not be attracted, the burden of bonds is too disproportionate and unbearable. “If that’s the case, it’s management’s responsibility, and they have to take responsibility, regardless of the reasons. Also, the fact that there are a lot of contingencies that AB has faced is management’s responsibility, because it shows either that the business plan no stress tests have been done and there has only been an optimistic scenario, either they are probably unsuccessful in business and they are chronically underperforming. That is also a problem of management, not AB or shareholders,” believes INVL Family Office manager Andrejs Martinov.
Of course, without access to the company’s internal information, the public does not have precise clarity about AB’s business plan and its scenarios, execution progress, management promises and deadlines, and the attitude of shareholders.
Responsibility must be taken
Banks Citadel economist Kārlis Purgailis currently does not see any big improvement neither in AB’s business activities nor in the financial situation, compared to the spring of last year, when the company’s last significant borrowing took place by issuing bonds. At the issue of bonds, investors felt that the company had too many problems and that the chosen business model was generally not working. Rather, problems are being postponed, buying time with the new bonds. AB Council Chairman Klāvs Vasks apparently admits this now in his LinkedIn post, saying: “Time is not our ally.”
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