Last week, airBaltic announced the extension of the collaboration with its ACMI-out customer: Lufthansa Group.
The Wet Lease Agreement
Since 2019 airBaltic has been a wet lease provider for Lufthansa Group. Notably, most such operations were implemented into the schedules of Swiss and Eurowings. airBaltic’s Airbus A220s fits very well as the extension of its fleet as the former is an A220 operator itself and the latter operates a significant portion of the schedule by a fleet of close to 30 Airbus A319s that seat the same number of passengers.
The magnitude of the cooperation grew over the years. In its annual report for 2023 airBaltic quoted up to 14 aircraft leased out, primarily for Lufthansa Group. The new agreement is set to extend the cooperation for three years beyond the summer of 2025. It is also said to cover up to 21 aircraft during the summer season and up to five during winter.
With an optimistic fleet expansion forecast provided by the carrier, its fleet should reach 87 units by the end of 2028. This means Lufthansa Group cooperation could take on up to 24% of airBaltic’s fleet.
European Aviation Chess
Earlier the same week, rumors surfaced, as reported by Reuters, about the Lufthansa Group considering taking a stake in the Latvian company.
Given the abovementioned ACMI cooperation, the investment would not be a far-fetched scenario. Both sides seem to be very content with doing business with each other. airBaltic is also operating codeshare flights for Lufthansa. This gives the German carrier much-needed access to the Baltic States in terms of connectivity where the routes are thin in demand.
It seems a bit early though as the Lufthansa Group is currently concluding its investment in Italy’s ITA Airways. The acquisition took many years and the competitive landscape of the European market was a concern.
On the other side, airBaltic is looking at the timing from an entirely different perspective. During the lean years of 2020-2022, the carrier was supported financially by the Latvian government. Even though the cash was not simply given out, but the state invested in both the equity and debt of the carrier, the expectation is that the airline will make it whole.
The planned IPO of airBaltic is supposed to be the exact moment for that arrangement to unwind. The airline is rounding up investors to participate and the process might take place with or without Lufthansa Group as part of it.
