AirBaltic's IPO ambition: wise to wait as airline cycle turns

Premium Analysis

AirBaltic CEO Martin Gauss said in Jul-2019 that 2021 or 2022 could be a suitable time for an IPO, provided the airline is meeting targets. He is right not to rush this urge for a stock market flotation.

The Riga-based hybrid LCC has achieved a strong return to growth since 2016 after years of stagnation and losses. Moreover, it has achieved positive net profits for six years running and is now partway through a transition towards a fleet wholly consisting of the Airbus A220-300, for which it was the launch customer in 2016. However, its net margins are low and its operating profit record is more patchy.

Furthermore, airline industry margins appear past their cyclical peak and over the past two years most European airline share prices have fallen. The European airline landscape has for some time been dividing into two broad categories: those with strategic and financial strength and those that struggle to generate sustainable profitability.

A downturn will test all airlines, but those in the stronger category will be better placed to meet this test than in the past.

AirBaltic has the potential to join this group, but continued patience before launching an IPO is sensible.

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