The great European airline consolidation race has just taken its next turn with Lufthansa Group purchasing a minority stake in airBaltic. Lufthansa Group (parent company of Lufthansa, SWISS, and Austrian among others) is one of three major aviation organizations operating in Europe , the other two being International Airlines Group (IAG) and Air France-KLM Group.
The parent company of Germany’s flag carrier, which recently acquired 41% of Italy’s ITA Airways, is investing €14 million in the airline in exchange for 10% of the company. The investment also comes with a Supervisory Board seat. The transaction is expected to close sometime in Q2 2025, subject to it passing antitrust review.
After Lufthansa Group’s stake in airBaltic is finalized, airBaltic is expected to undertake an initial public offering (IPO). Should the IPO occur, Lufthansa Group’s stake would converted to ordinary shares based on the potential market price for the IPO. Regardless of the IPO price, Lufthansa Group would retain a minimum of 5% of the carrier. The government of Latvia is also expected to retain 25% of the carrier after the IPO.
While I have never flown airBaltic, I have seen its distinctive lime green and white planes during my travels around Europe and the carrier has a unique business model. airBaltic is the flag carrier of Latvia and also serves as the de-facto flag carrier for Lithuania and Estonia. It operates an all Airbus A220-300 fleet.
I’m unsure as to the motivation behind this investment but airBaltic has partnered with Lufthansa Group airlines before. The airline has been a partner of Lufthansa Group airlines in the past via wet-lease partnerships during periods of peak demand.
There is also the possibility that Lufthansa Group and its Star Alliance partners were looking to fill a hole in the Nordic countries with SAS making the switch to SkyTeam. airBaltic does not operate any long-haul flights but it could increase service to Lufthansa Group hubs if needed.
It could just be the fact that Lufthansa Group loves buying stakes in airlines and said what the heck (I’m only slightly joking). Either way, I expect this to have no issues meeting regulatory approval due to the small stake Lufthansa Group is taking in the airline.
It will be interesting what effect, if any, this will have in the airBaltic short term and whether Lufthansa Group will look to increase its stake in the future.
Summary
In an interesting development, Lufthansa Group is buying a 10% stake in airBaltic, the flag carrier of Latvia, for €14 million. It is expected that airBaltic will undergo an IPO later this year and Lufthansa Group will retain a 5% stake in the carrier at a minimum.
Lufthansa Group has worked with airBaltic closely as the latter has provided aircraft for the former during peak travel seasons via a wet-lease agreement. It will be interesting to see what changes, if any, occur due to this investment and whether Lufthansa Group will look to buy more of the airline in the future.