Air Baltic - comment

As per our initiation |M, subsequent commentary and Tuesday’s call, support for the Riga-based carrier is going to be a political lightning rod ahead of elections in Q3. Latvia’s PM Evika Siliņa (JV) is now officially (and savvily) ready to axe the transport minister and break her fragile centre-left three-party coalition. Although parliament has in principle approved it, the ZZS (JV’s coalition partner) are refusing to back the loan unless Atis Švinka PRO (JV’s other coalition partner) steps down. Curiously, the centre is quite in favour of doing the pragmatic thing, while both wings are opposed, or only conditionally supportive. None of it is good for Air Baltic, but continued political campaigning around the restructuring will be the reality for this restructuring. The break-up of the coalition or the exchange of transport minister itself should not drop the bonds. The loan should be granted, if needed, with a x-party ad-hoc majority including opposition votes. It’ll be a good look for Siliņa. She has a fair chance to survive the election, and her party should, in all likelihood, be involved in the next coalition also.