The fuel crisis caused by the war in Iran has severely impacted airBaltic, which has been dangerously weakened by enormous debts, writes Ir.
How can the national airline stay afloat?
"I can’t say," responds Andulis Židkov, the State Secretary of the Ministry of Transport, when asked if the airline is experiencing the greatest financial difficulties in its history.
There have been difficult conditions before, when Židkov was not yet working in the ministry, so he cannot make comparisons. However, the State Secretary does not hide that the situation has worsened. The company has not actually recovered from previous crises when the next one hit.
A ton of aviation fuel cost 675 euros at the end of February, but by April it had risen to 1400. And since hopes for attracting capital on the stock exchange this year have collapsed, the company urgently needs to solve its liquidity problems and free itself from an disproportionate debt burden. Its further existence is at risk, warns the State Audit Office.
To buy time to resolve the deepening crisis, the Saeima voted on April 16 for a short-term loan of 30 million euros for the airline. Disagreements among coalition partners nearly led to the government’s resignation, but even after the Saeima's positive decision, only time was gained to search for real solutions - the new business plan is still unclear, as are the sources of funding to address the financial crisis.
The loan ensures the company’s liquidity until September, sources familiar with the restricted-access documents on this matter confirmed. According to the State Audit Office, the company has a significantly higher debt load than its competitors and is unable to ensure a sufficiently high load on its fleet.
The state has already invested 559 million euros in the unprofitable company. If it weren’t for high interest payments, the company would be operating at break-even or even profit, Židkov calculated. To ensure that airBaltic "recovers and operates normally," it is extremely necessary to attract capital. What will happen if a new investor cannot be attracted over the summer? "Not all information can be disclosed, but there are several scenarios," Židkov replies.
