Air Baltic Corp, the biggest customer for Airbus SE’s A220 jet, plans to use its latest order for the aircraft to establish a new airline elsewhere in Europe and could seek private-equity funding for the project.
The Latvian company aims to deploy 30 A220s at the new carrier and replicate the model that brought it success at home, where it has established Riga as a hub for flights between Europe and central Asia, Chief Executive Officer Martin Gauss said in an interview.
Details of the strategy will be revealed when Air Baltic firms up remaining order options for the A220 at the end of the year. The company will appoint an adviser to work on financing for the planes once the Latvian state, its biggest shareholder with an 80 percent stake, has settled on a new government.
Seeking further funds for Air Baltic from the country and Danish minority investor Lars Thuesen remains an option, but selling a stake to a private-equity firm has emerged as a distinct possibility, Gauss said. He cited Wizz Air Holdings Plc, backed by William Franke’s Indigo Partners, and Volotea SL as examples of airlines that have benefited from the involvement of investment firms.
It’s also possible that Air Baltic could sell shares to another airline, though the carrier’s scale might limit its appeal, Gauss said. Either way, the disposal of a stake could pave the way for an initial public offering of the Latvian carrier, with the company’s appeal enhanced by its ranking as Europe’s most punctual airline over the past five years, something that’s vital to the hub model, the CEO added.
Air Baltic currently has 50 A220s — formerly the Bombardier Inc CSeries — in its fleet or on order, and those are sufficient to meet the needs of the existing operation, which also serves Lithuania and Estonia, Gauss said. Deliveries are set to continue at a rate of about 12 a year through 2022, when handovers from the 30 options would commence.