Lufthansa said to weigh investment in Air Baltic before IPO

Deutsche Lufthansa AG is considering taking a stake in AirBaltic Corp. ahead of the Latvian state-owned carrier’s proposed initial public offering, according to people familiar with the matter.

Talks are at an early stage and no decision about an investment has been made, said the people, asking not to be identified discussing confidential deliberations. Air Baltic’s management has been gearing up for an IPO by the end of 2024, though Chief Executive Officer Martin Gauss has indicated it could also occur in the first half of 2025.

Lufthansa declined to comment, as did AirBaltic.

Latvia has said it plans to keep at least 25% of AirBaltic after the IPO. Its Ministry of Transport, which is managing the sale, declined to comment.

Acquiring a stake in AirBaltic would fit Lufthansa’s broader approach of building investments in national flag carriers with the option of later increasing ownership. Earlier this year, Lufthansa received approval to purchase a 41% stake in Italy’s ITA Airways, the successor to Alitalia, adding to its existing holdings in carriers in Switzerland, Belgium and Austria.

Shares of Lufthansa reversed earlier gains and were down 0.5% as of 2:42 p.m. in Frankfurt. AirBaltic bonds rose the most in almost a month.

The company’s management is determined to play a role in further consolidation of Europe’s aviation market. Chief Executive Officer Carsten Spohr met this month with Portuguese government officials as the German airline group weighs a possible investment in state-owned TAP SA.

The German airline has operated flights with AirBaltic under a code-share agreement since 2021. Earlier this year, Lufthansa’s Swiss subsidiary used Air Baltic aircraft under a leasing agreement, where Swiss-ticketed flights were operated by the Latvian carrier using its planes and crew.

An unidentified strategic investor is in talks with AirBaltic to acquire an initial 10% of the airline’s shares ahead of a public offering, Latvia’s public broadcaster reported on Sunday, without saying where it got the information.