Latvia’s national airBaltic airline’s last year’s capital was minus 106.8 million LVL. On top of that, the company has yet to reach an agreement on the restructuring of its short-term obligations, the total volume of which now exceeds 74.9 million LVL.

According to airBaltic’s audit annual accounts, one of the most serious threats to the national airline is a number of litigations, the outcome of which is still uncertain, even though the management of airBaltic optimistically claims that no significant losses are expected to come out of these litigations.

The currently solvent Lithuanian company AB flyLAL – Lithuanian Airlines’ August 12, 2008, submitted claim to the Vilnius Regional Court against airBaltic, accusing the former in unjust competition and demanding a 40.7 million LVL compensation for the losses the company suffered. The court has yet to review this claim in detail. Nevertheless, an arrest has been issued on the defendant’s real estate worth, in total, no more than the claim.

Meanwhile, the Vilnius Regional Court is reviewing the claim related to this case from AB flyLal – Lithuanian Airlines shareholders – VA Reals and AB ŽIA. This claim is about suffering losses worth 61.6 million LVL. The management of airBaltic and their lawyers, on the other hand, «believe that the result of the aforementioned litigation will not create additional losses. This is why there were no savings made in relation to this case on December 31, 2011».

The litigation with a number of other creditors also seems unavoidable: «In accordance with the shareholders and creditors contract that was signed on October 3, 2011, which was followed by an increase of obligations noncompliance from the side of Baltijas Aviacijas Sistemas. The airline is requested to reduce its short-term obligations with different creditors by 35 million EUR.»

Also, in accordance with the said contract, the remaining obligations towards BAS of 31 million LVL are to be refinanced in a long-term loan with a term of 15 years. On October 18, 2011, the company’s creditors – BAS, Taurus Asset Management, Transatlantic Holding and others – affirmed the airline’s relief of obligations until the contract is restructured. This agreement dictated that the creditors are not allowed to receive any payments from the airline or its daughter companies. Negotiations about the restructuring of the loan are planned to take place in the second quarter of 2012.

If the company will not be able to reach an agreement on restructuring of shirt-term obligations, the airline’s management will resolve the conflict at court.

Litigations will be initiated in relation to airBaltic’s daughter company Baltic Airlines (BA): «BA’s main activity in 2011 was the sublease of airplanes and real estate rent. BA is a 100% owner of two daughter companies – Baltic Miles and Air Baltic Training. In previous finance periods, BA received loans from Latvijas Krajbanka. According to the statement issued by Krajbanka on October, 2011, BA is authorized not to perform payments to Krajbanka. Despite this fact, on December 6, 2011, Krajbanka realized its rights on commercial loans for all BA assets. BA challenged Krajbanka’s decision at Riga District Court.»

Another notable litigation is the one with Russian Investbank, – airBaltic has already prepared 12.2 million LVL worth of savings in case of possible losses: «In March, 2012, Investbank turned with three claims against airBaltic and BAS with a total amount of 12.4 million EUR. Investbank’s claim against airBaltic is based on the guarantee contract, which was, possibly, signed by an airBaltic representative. airBaltic hired a law firm in Moscow and prepared a strategy for the litigation process. The airline also prepared savings (12 243 thousand LVL) just in case.»

Ref: 102.109.109.2953