Lufthansa Group to acquire 10% stake in airBaltic

Lufthansa Group has signed an agreement to receive a convertible share representing a 10 per cent stake of the Latvian state airline airBaltic which will be issued at a subscription price of €14 million.

The convertible share will be changed into ordinary shares upon a potential initial public offering (IPO) from airBaltic. The size of the stake will be determined by market pricing of the potential IPO, with Lufthansa Group’s share amounting to no less than 5% of airBaltic.

The IPO from airBaltic was originally aimed to be launched in 2020 but was pushed back due to the pandemic. The Latvian airline’s CEO Martin Gauss told Airline Economics’ Growth Frontiers Dublin 2025 conference that the earliest opportunity for the launch could be the first half of this year – potentially being pushed back into the second half or even into early 2026. 

The IPO launch has seen some issues as it contends with engine delivery issues. The airline was forced to cancel nearly 4,670 flights for summer this year due to issues related with the Pratt & Whitney geared turbofan (GTF) engine.

Rumours had long been circulating in media reports that Lufthansa would be a pre-IPO investor in airBaltic. In an interview with Airline Economics in Dublin, when asked on the Lufthansa rumour, Gauss said “the rumour has been around for quite a while” but “could not comment” on it. He added at the time: “We can confirm that we have a pre-IPO investor discussion going on.”

Lufthansa said the transaction will also further develop cooperation between the two parties, allowing for further development of wet lease services. The two had recently extended wet lease agreements for a further three years beyond summer 2025. The partnership will allow Lufthansa to deploy up to 21 additional aircraft of the A220-300 in summer and five aircraft in winter of the same type. The company said this will allow to “more flexibly” respond to customer demand this summer. 

Additionally, Lufthansa Group will receive a seat in the airBaltic supervisory board as part of the transaction.

Speaking to Airline Economics, a spokesperson for Lufthansa said: “From our point of view, the advantage of the deal is that we are making a long-term strategic commitment to each other without entering into any further/post-IPO financial obligations. 

“As of today, it is too early to comment on any post-IPO plans yet. A consolidation is not a concern for us at the moment.” The spokesperson reiterated that the transaction was aimed at strengthening its partnership with airBaltic and in turn reinforcing its wet lease agreements, which “remains a primary focus” for Lufthansa.  

The closing of the transaction is planned for the second quarter of this year.