Editor comment
Didzis Veinbergs
10.10.2011
Bertolt Flick, we hardly knew ye
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| Editor, news2biz LATVIA |
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So it is official: the airBaltic saga has reached, if not the end, then a major milestone. The Latvian government is no longer just the nominal majority shareholder: it actually now controls the airline. A bailout plan has been prepared and approved and hopefully will be soon put into action. And, most importantly, the airline's flamboyant CEO Bertolt Flick has stepped down.
Few would argue that Flick has had a tremendous impact on airBaltic – and nobody more so than Flick himself. In his very emotional farewell letter, he noted: "Over the last almost 10 years, I have mainly built up an excellent management team and together we have created an excellent and award-winning company."
It is hard to disagree. airBaltic, all its current troubles notwithstanding, is still a phenomenal company. In 2002, when Flick took office, it had just five planes and flew six routes. By now, it has 34 planes, and it carried three million passengers in 2010. Its market share reached 66% in Latvia and 50% in the Baltics.
Indeed, it would be wrong to attribute all this success just to Flick: like he himself pointed out, his management team has contributed just as much, if not more. Still, for years, airBaltic was synonymous with Flick who made the airline in his likeness: success-driven, flashy and loud – but also notoriously secretive, evasive and unwilling to admit mistakes until it is too late. So who is this man who made – and broke – an entire airline?
Nowhere Man
When talking about Flick, it strikes you that, for a man who has been in the limelight for so long, we really know very few things about him. He has a carefully groomed public image, charming people with his flawless Latvian – and learning Latvian is a sure way how to win the hearts of Latvian people – a friendly smile and a firm and confident handshake. But if you ask him something he would rather not reply, he will simply refuse – still smiling, of course.
His secrecy is almost laughable. For one, there is almost no publicly available information about his private life. All we know that his full name is Bertolt Martin Flick, he was born on 2 July 1964 in Pirmasens, Germany, studied history for one year in the United States and returned to Germany after dropping out, where he received his law degree from the University of Heidelberg in 1991.
From 1992 to 1994 he worked for the German Ministry of Justice, but his career really took off in Latvia, where he appeared in 1994 as a consultant in the Latvian Privatisation Agency. In 1997, he became a board member for Latvijas Gaze, and he really became a household name after he became the president and CEO of airBaltic in 2002.
To anyone who knows something about the Latvian business climate in the mid-nineties, this sparse information creates much more questions than it answers. How did Flick even learn about Latvia and the vast opportunities that lie ahead? What kind of people did he meet and what connections he made during his years in the Privatisation Agency? How did he become a board member of a major Latvian company just three years after he first appeared in Latvia? How did he, having no previous experience in the airline business, get involved with airBaltic?
Neither airBaltic nor Flick have ever been too eager to provide any answers to these questions. But just by looking at their actions, you can clearly see that, for Flick, the 1990s just never ended.
Schemes and secrets
It must be his years in the privatisation agency: at one point Flick figured out that airBaltic is just too good a company to leave for the state. What followed next is a privatisation scheme that nearly succeeded and was so cunning that it would leave most schemers from the 1990s – from whom, no doubt, Flick had ample opportunity to learn – to shame.
Flick's breakthrough opportunity arose in late 2008, when SAS, the previous minority shareholder of airBaltic, offered selling its shares. The majority shareholder, the Latvian government, decided not to use its right of first refusal, and Flick, acting through his own company Baltijas Aviacijas sistemas (BAS), grabbed the opportunity – and the shares.
Several things stand out. First, the minister of transportation who advised the government not to buy the shares was none other than Ainars "Bulldozer" Slesers, one of the three Latvian oligarchs who, just like the other two, made much of his wealth in the mid-nineties – and, you got it, by several highly successful privatisation deals.
Second, although late 2008 certainly was not the best time for the Latvian economy, Flick promptly found the money. It was generously provided by Latvijas Krajbanka, owned by Russian billionaire Vladimir Antonov who – what a coincidence – privatised it back in 2003. Of course, it is much later than Flick's tenure at the Privatisation Agency, but it seems highly unlikely that someone would just purchase a major retail bank without having eyed the market for a long time. Plus, Flick had made friends in the agency: its long-running director Janis Naglis is also Flick's business partner.
Third, just a few months after BAS bought the shares, the same Slesers, on his last days as the minister of transportation, signed a new shareholder agreement with airBaltic. It allowed airBaltic's board – with Flick being the only member – to sign agreements up to EUR 10m without government permission. Flick did not even ask government's permission to buy, sell or rent airBaltic's planes.
And indeed, Flick did not shy away from using his Slesers-given right to sell just about anything he saw fit. Right away, his company BAS founded a multitude of companies that took over more and more functions of the airline: ground handling, security, accounting and hiring its pilots, for example. Soon enough, this started to raise fears that Flick is moving the assets of airBaltic to his own company, leaving the airline itself a little more than just the name.
The only thing is, it did not even have the name. On 22 December 2009, in what must be one of the most shameless business deals ever signed in Latvia – and this really is quite a distinction – airBaltic's brand was sold to BAS for EUR 13m. As this is above the EUR 10m limit, the deal had to be approved by the company's board which also included government representatives. It did so unanimously.
In a strange twist of events, the larger public – including the Latvian government – only learned about the sale in August 2010. Unsurprisingly, the news sparked a massive outrage, and this could well be seen as the beginning of the end for the old airBaltic.
Successful yet nearly bankrupt
As if selling the very name of the airline and not informing the majority shareholder was not enough, the sale highlighted a bigger problem. airBaltic was losing money, and the sale was an attempt to boost the airline's profits with some creative accounting.
By now the government, obviously disappointed by the way how Flick had treated it, was watching airBaltic's every move. What followed reads like a John Grisham thriller.
Even back in 2010, there were hints that the airline is in serious financial trouble. For one, it had an LVL 7.15m debt to Riga International Airport, although it tried explaining it away by claiming that the airport has been providing illegal discounts for the airline's main competitor Ryanair.
Still, everyone was at least somewhat surprised when, in June 2011, the minister of economy Artis Kampars announced that, despite its growing number of passengers, airBaltic has lost money throughout 2010 and is near insolvency. Hearing this, Flick fled back to Germany where he remains to this very day, explaining that he is afraid the Latvian government is preparing a forcible takeover of the airline and he fears reprisal from the Latvian law enforcement.
His fears are well founded, as the Latvian corruption watchdog indeed has started a criminal case against him.
Keeping all this in mind, it is little surprise that, when it was confirmed that the airline indeed is near insolvency and needs a bailout, the Latvian government presented an ultimatum – if airBaltic is to receive any state money, Flick has to go.
A new beginning
So here we are now. Flick is gone, although he – or, most likely, his Russian creditors – still remain shareholders in the airline. The government has vowed to keep the airline flying, as indeed it should, since airBaltic's downfall would be a huge shock to the Latvian tourism industry. And, with corruption watchdog fresh on Flick's track, we might finally get some answers to the questions Flick just would not answer.
Still, for all his obvious moral shortcomings, Flick has made a major contribution to the Latvian economy – and, even though airBaltic now faces a costly bailout which the government cannot really afford, its net impact, without doubt, has been positive. Of course, he and his accomplices should be brought to justice. But at the same time, it is just as certain that we also have a lot to thank him for.
If only Flick's brilliance as CEO did not go hand in hand with his deep moral corruption.