Air Baltic shareholders agree $200m rescue package

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Shareholders in Latvia's struggling flag-carrier Air Baltic appear to have resolved their stand-off over a rescue package, with an agreement to inject Ls108 million ($207 million) into the airline.

Air Baltic has been seeking a much-needed capital increase but its private shareholder, Baltijas Aviacijas Sistemas, has been in dispute with the Latvian government, the majority owner, over terms for the funding.

Latvia's government has passed a resolution to invest Ls57.6 million into the airline, while Baltijas will put in a proportionate figure of around Ls50 million.

Part of the funding will go towards "changing the air fleet", said the government.

Prime minister Valdis Dombrovskis said the government had "expressed readiness" to participate in "stabilising the financial situation" of Air Baltic, if Baltijas had been prepared to meet conditions laid down by the state.

"The government has fulfilled its tasks and current responsibility lies in the hands of [Baltijas]," added Dombrovskis.

These conditions include the removal of chief executive Bertolt Flick, the creation of a new board, and other changes to the carrier's governance and operations.

The government's financial representative in the discussions, Karlis Krastins of consultancy Prudentia, said that Baltijas had "changed its style of co-operation" and this had resulted in the "opportunity to agree on the necessary solution".

Air Baltic shareholders held a meeting today and agreed to finalise details on the capital injection by 4 October.