Latvia's Air Baltic has accused the country's government of duplicity in trying to set up a new airline, after the struggling carrier failed to secure legal protection for its operations.
The government has confirmed that it is to "investigate the feasibility" of establishing a new operator and is looking to attract aviation specialists to advise on financial and technical matters.
Setting up a new carrier is one of three scenarios being discussed at cabinet level in Latvia, as a result of the Air Baltic crisis.
The government said that it is also studying a proportional increase in capital for the airline as well as the sale of the state-owned shareholding to another investor.
To obtain the capital injection, said the government, Air Baltic's private shareholder, Baltijas Aviacijas Sistemas, must "immediately" implement all government requirements including proof that it has sufficient funds to invest.
But Air Baltic has accused the government of "methodically and systematically" undermining confidence in the airline "in order to pave the way for a potential new project", and adds: "It is now no longer surprising why a solution regarding Air Baltic has not been reached for more than six months."
The airline's efforts to file for a protection procedure to break the "stalemate" over the much-needed capital injection have failed, the carrier said, after a court rejected its application.
Air Baltic insists that Baltijas Aviacijas Sistemas is prepared to cover the capital increase "fully" and claims it has agreed to all government conditions for the funding.