The Lufthansa Group has signed an agreement to acquire convertible shares corresponding to a ten percent stake in the Latvian airline Air Baltic. The purchase price is 14 million euros. In addition, the Lufthansa Group will receive a seat on the supervisory board of Air Baltic.
The convertible shares will be converted into ordinary shares in the event of a potential IPO of Air Baltic. The level of participation will then be determined by the market price of the IPO, with the Lufthansa Group's share being at least five percent.
This transaction builds on the existing wet lease agreement between the Lufthansa Group and Air Baltic and is intended to strengthen Air Baltic as a strategic partner of the Lufthansa Group. The expanded cooperation will enable the Lufthansa Group to expand its route network and enter new markets. In addition, further development of the wet lease services in line with customer needs is planned. The transaction is scheduled to be completed in the second quarter of this year, subject to antitrust review.
The wet lease agreement between the Lufthansa Group and Air Baltic was recently extended for a further three years. This agreement makes it possible to use up to 21 additional Airbus A220-300 aircraft in the summer and five aircraft of this type in the winter at various Lufthansa Group hubs. This allows the Lufthansa Group to respond more flexibly to seasonal demand. With the additional capacity from Air Baltic, destinations in the route network that are in high demand can be served more flexibly in the future. At the same time, the stability and quality of the connections to the intercontinental offer at the Lufthansa Group hubs will be improved.
Air Baltic is Latvia's largest airline, based in Riga, and operates a fleet of 50 Airbus A220 aircraft. Since 2019, the Lufthansa Group has been working with Air Baltic, which has proven to be a reliable partner. The Lufthansa Group's planned investment in Air Baltic comes at a time when Air Baltic is aiming for an IPO. This was originally planned for the end of 2024, but was postponed to the first half of 2025 at the earliest due to market conditions. Air Baltic CEO Martin Gauss stressed that the timing of the IPO depends on further developments in the financial markets.
The Lufthansa Group's investment in Air Baltic is expected to deepen the existing partnership and bring benefits to both companies. The Lufthansa Group could benefit from additional capacity and a stronger presence in the Baltic States, while Air Baltic would be better placed for its IPO with a financially strong partner at its side. The European aviation industry remains fragmented and smaller national airlines face challenges in competing with larger competitors. The Lufthansa Group's investment in Air Baltic could be part of a long-term consolidation process in the industry. The coming months will show how the negotiations between the Lufthansa Group and Air Baltic develop and what impact the investment will have on European air traffic.