Lufthansa Group has agreed to take a 10% convertible shareholding in Air Baltic, ahead of the Latvian carrier’s upcoming initial public offering.

The agreement – valued at €14 million ($14.6 million) – involves Lufthansa’s acquiring convertible shares which would be changed to ordinary shares once the offering takes place.

Lufthansa Group would hold at least 5% of Air Baltic following the IPO, with the size of its stake ultimately determined by market pricing.

The two carriers already co-operate through a wet-lease agreement.

Lufhansa Group says the transaction “intends to strengthen” the role of Air Baltic as a strategic partner.

Air Baltic A220 tail-c-Air Baltic

Source: Air Baltic

Lufthansa’s investment comes ahead of a planned Air Baltic initial public offering

“Expanding this commercial co-operation allows Lufthansa Group to improve the quality of its network and to add additional markets,” it states.

“Further product development of the wet-lease services in line with our customer expectations is planned.”

The wet-lease tie-up allows the seasonal deployment of Airbus A220s at Lufthansa hubs.

Lufthansa Group says the transaction is expected to close in the second quarter.

Air Baltic chief Martin Gauss had previously stated that the airline was in discussions with an international carrier regarding investment in the airline.

Lufthansa Group would hold a seat on Air Baltic’s supervisory board.

Air Baltic says the deal provides “additional funding” to the airline and “supports its growth plans”. The carrier has newly confirmed that it is to provide A220s to a new Uruguayan start-up carrier, SUA, later this year.