airBaltic, which reported a loss of almost €90 million for the first half of 2024, is using a rather old-fashioned national airline model that requires a lot of investment, while the hope of becoming profitable remains rather distant, Peterson said.

"This is not the right business model in my opinion. This old-fashioned national airline business model, which does not pay off on this kind of scale. Like we had Estonian Air, trying to go very wide, so that if there is an effect of scale, you can make a profit, but it takes a long time and a lot of investment. Basically, it is not a profit-making project, but the Latvians have the same argument that Estonia might have, that (without it) you wouldn't be able to fly out of this corner of the world," Peterson said.

Financially, however, airBaltic is in a bad way, as its high-interest bond issue showed, said Peterson, who has been the head of both Estonian Air and the Estonian Civil Aviation Administration (Lennuamet).

"The biggest negative signal actually was that they got a loan from the market at only 14.5 percent interest, which is still terrible these days. Basically, it shows that it's just a pyramid scheme in financial terms, and that at some point it just has to collapse," Peterson said.

Peterson added that if it were up to him. he would change airBaltic's business model.

"This (legal) body has to be replaced by another one. It was a bit like what happened with Estonian Air when it did not get the state approval (from the European Commission) that the Latvians got," he said.

"I am not in favor of state capitalism, that the state should be the owner of something, but the thing about air connections is that you have to pay extra if you want to fly ten times a day to Europe. My estimate is that the Estonian state would have to pay something like 30 to 40 or even €50 million a year. But in this form, I would recommend that (airBaltic) be shut down, despite the fact that Estonian passengers also benefit from it," Peterson said, adding that airBaltic is such a mess in commercial terms that it will be difficult to close it down.

Aviation expert Sven Kukemelk told ERR that despite the huge losses, airBaltic is still a profitable project for the Latvian state, as tourism and jobs cover those losses many times over.

According to Peterson, a comparison can be made with the planned Rail Baltica.

"We can make socio-economic calculations, and it's true that the development of the economy is very much dependent on it, but these are all forward-looking calculations.  We don't know how the economy will do at all, or how many passengers will come, and a lot depends on their purchasing power. So, it's all apples and oranges. But to put it crudely – if they only got a 14.5 percent interest loan from the market, that shows that essentially the end is near," Peterson said.

Palmer: airBaltic affected by external factors

Jan Palmer, the former head of Estonian Air and Nordica, told ERR that airBaltic's performance in the first half of 2024 was certainly poor, but it was also influenced by a number of external factors. They include problems with engine deliveries, recovery from the pandemic and the war in Ukraine. The potential for airBaltic to achieve success as an airline has not disappeared, he said.

"As an airline they have done a good job, but they have been affected by these external factors. And if you have a lot of planes that can't fly because of engine problems, well, it's one thing to have the repair costs that can be covered by insurance, but losing revenue would be a big problem for any airline," Palmer said.

According to Palmer, the Latvian government may still find it is profitable to run a national airline.

"There may be socio-economic calculations behind it – if it is worth it for Latvia and the government is willing to support it because the associations will ensure that it is good for business and tourism, then from that perspective it may make sense," he said.

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