Lufthansa buys stake in airBaltic

Lufthansa Group acquired a 10% stake in Latvia’s airBaltic for EUR 14mn on January 29, pending antitrust approval. Europe’s largest airline group has long been interested in the Baltic region, and airBaltic, headquartered in Riga, Latvia, and flying to over 100 destinations across Europe, the Middle East and Asia. Lufthansa was also attracted to airBaltic’s modern all-Airbus A220 fleet.

The Latvian state currently owns 97.97% of the airline, while Danish investor Lars Thuesen’s Aircraft Leasing 1 owns 2%. This investment, structured as a convertible share, will grant Lufthansa a seat on airBaltic’s supervisory board, likely in the second quarter of 2025. The convertible stake would become ordinary shares on airBaltic’s expected Initial Public Offering (IPO), although the timeline for this has been subject to change due to market conditions and operational challenges.

The acquisition could also have strategic implications for Star Alliance, the global airline network led by Lufthansa. AirBaltic has traditionally operated independently, preferring to establish bilateral partnerships rather than joining a formal airline alliance. However, Lufthansa’s stake has fueled speculation that airBaltic may integrate more closely into Star Alliance. Sources within the aviation industry say Lufthansa’s involvement may gradually push airBaltic towards membership. However, there has been no official indication that airBaltic plans to join the alliance.

Regulatory review ongoing

The German Federal Cartel Office has begun reviewing the transaction to ensure it does not distort competition in the European aviation sector. Given Lufthansa’s dominant industry position, regulators will scrutinise the deal before approving, although no specific details about the review process have been publicly disclosed. If greenlit, the transaction could pave the way for Lufthansa to further increase its stake in airBaltic.

From a financial perspective, airBaltic is currently preparing for an IPO slated for early 2026 and has been seeking strategic investments to strengthen its balance sheet ahead of time. Lufthansa’s involvement should enhance investor confidence and improve airBaltic’s valuation.

The broader aviation landscape is also shifting, with Lufthansa actively expanding its investment portfolio and has also discussed stake acquisitions in Spain’s third-largest airline Air Europa and Italian Flag carrier ITA Airways, in which it currently owns a 41% stake, with the rest owned by the government of Italy. The specifics of these deals are subject to ongoing negotiations and regulatory approvals. 

Industry greets news of buyout with optimism

For Estonia and other Baltic states, Lufthansa’s move is seen as a positive development. Industry observers say stronger financial backing for airBaltic could lead to route expansions and improved connectivity.

Estonian Air CEO Toomas Peterson, who headed both Estonian Air and the Civil Aviation Authority, told local media that Lufthansa’s decision is good news. “This also indicates Lufthansa’s opinion on airBaltic’s current value, which would be around EUR 140mn. However, the final decision will be made by the new investors when the IPO is carried out — if it is carried out,” he added.

Peterson said taking into account airBaltic’s turnover, its debt burden of over EUR 1bn, accumulated losses from previous periods of around EUR 650mn, and Lufthansa’s capabilities, it seems like the German airline was granting Air Baltic a trust loan before the initial listing of its shares.

However, deeper integration with Lufthansa could see decision-making power move away from Riga and reduce airBaltic’s operational autonomy.

AirBaltic carried 5.2mn passengers in 2024, up 13% on an annual basis, while its number of flights rose 7%, to around 47,000. In 2023 airBaltic’s audited turnover was EUR 664.29mn, up 33.2%, and the airline made a profit of EUR 33.85mn, after posting a loss the previous year.