airBaltic IPO Set to Transform Latvian Aviation
airBaltic is gearing up for a major financial milestone as it prepares to launch its initial public offering in the second quarter of 2025. The Latvian airline, widely recognized for connecting the Baltic region with Europe and beyond, has set its sights on the London Stock Exchange as its primary listing venue, although there is also talk of a dual listing with Riga likely emerging as the alternate candidate. The move is expected to raise approximately EUR300 million, a sum that could significantly bolster the company’s growth and competitive positioning amid a challenging operating environment.
The planned IPO represents a strategic shift for airBaltic, which until now has operated with a dominant state presence. The Latvian government, currently holding a substantial 97.97% stake in the airline, intends to reduce its share while retaining a minority interest by keeping 25% plus one additional share. This partial divestment is being seen as a step toward modernizing the company’s financial structure and enhancing its ability to attract new investments. In a related development, Lufthansa Group recently invested EUR14 million to secure a convertible share that provided it with a 10% stake in the airline. Post-IPO, Lufthansa is expected to hold at least a 5% stake, although the exact figure will depend on how the market responds to the share pricing during the public offering.
This IPO announcement comes at a time when airBaltic is experiencing significant financial turbulence. In 2024, the airline reported a net loss of EUR118.2 million, a stark contrast to the EUR33.7 million profit recorded in 2023. Despite the financial setback, the company has managed to grow its revenue, which increased from EUR668 million to EUR747.6 million year on year. This revenue growth was driven by a notable 13% increase in passenger numbers, with the airline successfully transporting 5.1 million travelers across its network during 2024. However, this growth in passenger traffic was not enough to offset the financial challenges stemming from multiple operational issues.
Among the hurdles faced by airBaltic, increased competition in the aviation sector and the lingering repercussions of the war in Ukraine have taken a toll. However, one of the most pressing concerns has been the issues with Pratt & Whitney engines, which have severely impacted the airline’s performance. The company cited these engine problems as a critical factor contributing to its financial losses, noting that accelerated depreciation of its engines led to a negative financial impact of EUR40.5 million in 2024. Looking ahead, airBaltic has forecasted that the negative effects from these engine issues could amount to as much as EUR80 million by 2028. The persistence of these technical challenges is expected to continue throughout 2025 and 2026, putting additional pressure on the airline as it navigates an increasingly competitive market.
The upcoming IPO is seen as an essential step for airBaltic in addressing these challenges by injecting new capital and facilitating a restructuring that may help the airline invest in improved technology and operational efficiencies. Investors and market analysts will be watching closely to see if the listing can serve as a catalyst for financial recovery and long-term strategic repositioning in the volatile aviation industry.
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Sources: AirGuide Business airguide.info, bing.com, ch-aviation.com