airBaltic CEO Update

Transcript

Martin Gauss:It was a restructuring of several years which led— first we had to shrink the airline and then started growing again. '16 was the first year of growth. It ended very positive. Outlook for '17, it's even better. It has started even better at the moment. So in general, the industry at the moment is doing well, so we are doing well. And it all looks good, but it took a couple of years to get the airline back into profit. It had an effect in the first 3 years of the restructuring. It still has a slight effect, but the Russian routes are back to the levels we saw before, and for the foreseeable future, with what we have done on the Russian routes, it is okay. So it's priced in, let's say, for the foreseeable future. Yeah, we have a specific position. I'm criticized all the time to say that it's a low-cost hybrid. What we have, we have in the back an ultra-low-cost model because everything you know from the ultra-low cost we have in the back of the cabin. But we have in the front a full business class which can compete with any European business class with all the elements, and we combine the two. And it has to do with our market where we are in because we are connecting the Baltics with the rest of Europe, and I guess that's why there is a need for this business class. But the majority of the business is today ultra-low cost on point-to-point. And this combination, we found the right recipe to do it in the last years, and that's why for us it's successful. I do understand some others don't want to follow and criticize it, but as long as we make money with it, it's fine. Actually, what we do, we sell the whole aircraft always in economy, but the moment somebody books a business class ticket, we start installing the curtain as of row 1. And if we have more business class passengers joining, we reduce the capacity in economy. That's how we approach the The whole thing, and it works. We engaged Lazard as an international investment bank to have a global approach to it, mainly airline or investment funds which are investing in airlines, and it's a global search. Currently we are at the stage where we get the response if the interested parties are interested or not, and we have a couple of parties being interested. So the next step is now to send more detailed information to the interested parties, and then in the summer start the discussion if there's interest. And it's a global pitch, so we're looking globally for the right strategic partner. We don't have to sell, the company is stable for the next years, but we want to get the airline into private hands, or the state wants to, and that's why this search is going on now. We're going to order more aircraft for the future, so we want to put part of it on the balance sheet, so therefore equity is needed. But what the state definitely wants is to maintain the connectivity which existed in the year 2006, that was the connectivity where they said, okay, that's the base, and that needs to be guaranteed from the investor, that this connectivity for the Baltics is not disappearing over time. And that makes it maybe different to a normal airline investment, because there's a condition there to sell the airline. It's execution of the, of the existing business plan that is key. And now when you come from a very tough time of restructuring and you're back in profits, It's very difficult to keep the discipline because of course now everybody wants to be a bit more loose on things. So that's a challenge to keep that spirit which was there when we had to come back to profit. Another one is for a smaller airline, external factors like the dollar and the fuel price. Of course there's a much bigger impact to us because we cannot just turn back to the shareholders and say we want to raise money if things go in the wrong direction. But these things— so keeping the discipline for the next 2 years and being a bit lucky also with the macroeconomic factors.

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