Translated by Ollie Richardson for Fort Russ
12th November, 2015
Minister of Transport of Latvia, Anrijs Matisse, was fired due to the depressing situation of the national airline airBaltic, reports BBC Russian Service.
Meanwhile, investment, approved by the government to save the last airline in the Baltic region, according to unofficial information, will mean Latvia is going to sell Russian aircraft – Sukhoi SuperJet.
Today, airBaltic operates more than 60 flights from the airports of Latvia, Lithuania and Estonia. Its fleet consists of 25 aircraft; in 2014 it carried 2.8 million passengers. Partly thanks to airBaltic, Riga has became a Baltic hub – at least the company feels that way.
One problem: the first year the company worked with negative equity, money was not enough even to pay for debts already made, not to mention further developments.
At the end of 2011, the government nationalized 49% of the shares of a private investor since airBaltic is 99.8% owned by the state.
The suitcase without a handle
The government has already invested capital in airBaltic to the sum of over 50 million lats (70 million euros), but it was not enough. Investing can not continue for two reasons. On the one hand, the European Commission may consider such assistance by the state requiring a separate agreement.
On the other hand, we are talking about taxpayers’ money; it is difficult to understand why the state is once again investing millions in a business project rather than to raise pensions. However, not saving airBaltic would mean losing the last carrier in the region and all the money invested in it.
There is only one solution – to attract investors.
The venture itself began in 2011, when the government signed an agreement with an investment company called Prudentia.
While the search was ongoing, the company continued to try to evolve, including through the expansion of the fleet. In 2012 its intention was announced to acquire 20 Bombardier aircraft CS300, at the same time the advance was paid.
The media views the figure at 15 million euros, but the company does not with to comment on it. This year, it became clear that in addition to the absence in the equity capital of the company, it is has nothing to cover the last obligations to the manufacturers’ orders.
Prudentia immediately announced that it had found an investor – the only one who was able to make a favorable offer for the company. The offer consists of capital to airBaltic of € 52 million (in return for a 20% stake), the state then gives credit for another 80 million – this is enough to pay for the ordered airplanes and cover the hole in the equity capital.
Unofficially it learned that the investor is a German by the name of Ralf Dieter Montag-Girmes.
“The political mess”
It then began what the head of airBaltic Martin Gauss called, at the last press conference, “the political mess”.
In September, the former Minister of Transport of Latvia, Anrijs Matisse, called investors unreliable and persuaded the government to cancel the contract with Prudentia, which represented its interests. This was done.
A month later it turned out that the situation in airBaltic had not improved: the company urgently needed financial injections, and others investors aside from Montag-Girmes did not appear. In October, the government changed its mind again, restoring cooperation with Prudentia and approving an agreement with Montag-Girmes. The Minister of Transport, Anrijs Matisse, dismissed the decision of the Prime Minister.
As it became known later, he, until recently, insisted on non-cooperation with the German investor. According to Matisse, the state should invest 75 million in their own company . Against such an option, the Ministry of Finance feared sanctions by the European Commission.
The day later, the head of the prime minister’s party Solvita Āboltiņa announced that she had resigned and was ready to leave her post with the Prime Minister Laimdota Straujuma. Straujuma stated that this issue was not on the agenda.
After a few more days, Solvita Aboltina said that the coalition partners did not support the scheme, approved by the Government with the investor, and may have to seek a new solution. One of the coalition parties, “Unity”, refused to support the deal because of the discovery of the traces of Russian aviation.
“Superjets” and spy trail
Anyway, another option for cooperation with an unreliable (according to the ex-minister of communications) German investor is not available. However, neither the public nor the politicians do not really know the terms on which this cooperation will take place.
The Shareholders Agreement will not be disclosed, but some of the information circulates insistently – partly in the media, partly in the business environment. According to this information, the investor is willing to invest their 52 million, get 20% stake in the company, and airBaltic on its part will undertake the purchase of five aircraft from Sukhoi SuperJet of Russian production.
During a press conference the head of airBaltic, Martin Gauss, confirmed that the company recently revised its business plan and decided to buy another five regional aircraft. It happened right after it became known that Montag-Girmes became a potential investor. However, the management of the airline denied that a business plan had been revised specifically for the purchase of Russian aircraft SuperJet. There did not, however, deny the plans to purchase Russian planes.
In addition, Latvian television reported that the shareholders agreement provided the investor with almost exclusive rights for the supply to expand the fleet: that is, if they want to buy airBaltic regional aircraft, they must ask the German investors. If so, they should be purchased.
Montag-Girmes himself, during a press conference, denied whatever was communicated with the aircraft company SuperJet, pointing out that the negotiations that were conducted with airBaltic were quite the opposite from their desire to expand the fleet due to the lack of investment.
He also denied that funding received from any source was caught under the European sanctions against Russia – which were the concerns circulating in Latvia. According to Montag-Girmes, all 52 million were his personal savings. Latvia fears that the press has leaked enough information so that the security services can block the deal if it turns out that it is relevant to companies or people from the sanctions list.
Meanwhile, it is known that under Western sanctions does not list the manufacturer SuperJet and its company “Sukhoi”, but instead lists its parent company – United Aircraft Corporation.
Montag-Girmes denied any connection with the secret services – Russian or German. This is attributed to him by the Russian media, who claimed Montag-Girmes appeared in Russia in the early 90s as a financial advisor. He later became deputy head of the Russian Privatization Center, however, if the rumours are to be believed, he informed the authorities of his stay in military intelligence in Germany.
Later his name was repeatedly mentioned as the person representing the interests of the Russian aircraft overseas. Montag Girmes owned consulting company ARQ, which had worked with clients such as “Gazprom”, “Itera”, “investment bank” and “Ilyushin Finance Co”. The latter, incidentally, is 50% owned by United Aircraft Corporation, which includes the aircraft manufacturer Sukhoi SuperJet.