Originally Posted by
Wroclaw
airBaltic will not go bankrupt. These 570 million stories reflect the general public's lack of understanding of modern economics.
Firstly, the losses in the first half of 2024 are not real, they are accounting losses, and I'll let you have a look at airBaltic's balance sheets. If I remember correctly: 40 million for engine depreciation and 40 million for investment (probably a new simulator). It's not money, it's a book value. The operations themselves are generating profits, which is already very positive. They are investing massively in their growth at the moment, which is affecting the financial results. This is perfectly normal for any company at this stage. Then comes the reduction in costs and long-term profitability.
Secondly, the Latvian state has benefited enormously from airBaltic's expansion in recent years. We're talking about 400 million in taxes generated by the company alone over this same period. Indirect income (tourism, high value-added jobs, development of the airport and postal services) must far exceed the 570 million in total investment.
All the more so as the IPO was intended to enable the Latvian government to withdraw from the company and put a price on it. It is easy to imagine that such a company could be valued at several hundred million euros. So to sum up, the Latvian government's ‘losses’ were already quite negligible in basic terms, or even in profit thanks to all the business generated, but on top of that they could have recouped several hundred million euros in cash by selling their share...
Thirdly, airBaltic's financial strategy is fairly straightforward for anyone with a modicum of economic knowledge.
They have recently issued debt at a huge rate, allowing them to pay off the debts from the Covid period (which airbaltic is not responsible for, like the idiotic closure of the borders with Russia, by the way) in the short term. This loan is not viable in the long term with such rates. So the strategy was probably to go public to raise funds to pay off this debt quickly and finance future expansion in neighbouring countries. An intelligent strategy, provided that the government is not incompetent in these matters. By preventing the IPO, airBaltic will go bankrupt.
And in that case, the state will have nothing to do but bail out the company by paying off its debts (remember, airBaltic's operations are profitable, the company's problem is its debt). Otherwise, the company will disappear and the consequences for Latvia of the disappearance of such a large company will be catastrophic for the country. Everyone understands this except Latvians, who apparently still live under the Soviet Union mentality.
To conclude, the Latvians are killing a strategic company that contributes directly to 2% of their country's GDP, and perhaps 5% indirectly, because no one is capable of understanding that the economy is no longer Soviet and that the State is an economic agent that has its income in the form of taxes. I imagine that the buzz and the next elections are more important than the economic health of a country that has become a ghost country since the Covid.
They're probably going to prevent the IPO, which will plummet BT's finances (even though the state benefits greatly from the economic activity generated) and will surely bankrupt it. It's going to be a long-term drain on public finances. For no other reason than stupidity, let's remind ourselves one last time. Then, once airBaltic is in an unsustainable situation, we'll be rewarded with speeches from politicians explaining to the public that it's all airBaltic's fault. In short, the classic story of a public company. It's nothing new.
I'm telling you this without bias, I don't intend to stay with this company for long. Whether airBaltic goes bankrupt or not is of no importance to me. It's not my public finances, it's not my country, it's not my national airline. Latvians want to make a mess of the only company that brings any economic activity whatsoever, where prices have become insane and totally disconnected from the reality of the wealth produced in this country? Well, not my problem.