THE FIGHT FOR FLIGHT- Chapter One
Understanding the Beginning (1989-2000)

January 9, 2017

Please enjoy the first installment of The Fight for Flight. I welcome all positive and constructive feedback at [email protected]:

This is the beginning of the story of The Fight for Flight. The untold, unbiased, true story of an airline that over the years has ascended and fallen, only to continue to try to ascend again. It has certainly been a turbulent ride, yet most don’t fully understand the beginning. It is important to understand where something has come from in order to appreciate what it has become and where it is going. “It is darkest before the dawn,” and the dawn is now in sight. However, it was once very dark...

The airline formerly known as “Baltia Air Lines, Inc.” was originally a good idea, however geo-political changes have stark effects on international businesses. Founded in 1989, the goal was to serve the emerging markets of the Baltic States (Latvia, Lithuania, and Estonia) in their continuing efforts to become more fully independent of the Soviet Union. “The Company was incorporated in the State of New York on August 24, 1989, as a United States' airline, with an objective to provide full-service commercial, passenger, cargo and mail transportation from the US to the republics of the former Soviet Union.”*

In 1989, the airline filed for their Air Carrier Certification and applied for route authority to fly to St. Petersburg, Russia. The airline was not unaccompanied in their request. As a result of multiple applications for the route, the DOT initiated a “Route Proceeding” consisting of a special competitive hearing wherein the applicants for the rights to the route participated. After an intense case, specifically the 1990 US-USSR Atlantic Combination Service Case, Docket 47149, in which additional proceedings including an appeal to the Secretary of Transportation took place, Baltia won and was granted route authority (subject to certification) as requested.

As fundraising began, setbacks occurred. “No revenue operations have commenced on authorities granted in 1991 because the Company had not completed financing in 1992. At the time the Company received authority in 1991, the capital markets were slow, the airline industry was in a down-turn, and the USSR was transforming into separate nations, all of which the Company believed limited its access to public or private financing for commencement of flight service. Several of the Company's shareholders who are knowledgeable in financial matters tried to make introductions, but their efforts were useless. Nobody wanted to hear about an airline.”* Nevertheless, positive steps were being taken. At the time a leasing agreement for two Boeing 767-300’s was in effect and the planes were white-tailed pending Baltia operations.

In 1993, following what would be the first challenge of management in the company, certain investors out of Chicago removed Igor Dmitrowsky, the company’s founder and CEO at the time. As a result of the ouster, financing fell through and all startup operations ceased. Igor subsequently regained control and things continued to progress.

In January of 1996, tentative approval for the airline’s operations out of JFK using a Boeing 747 was issued by the DOT. The company at this point was paying little beyond actual out of pocket expenses though as management geared up for the company’s IPO, the airline’s payable account for all of the uncompensated legal work was steadily rising.

It is important to note that the initial IPO fell apart. This was due to the refusal of the then clearing agent, CIBC Oppenheimer Corp. (subsequently, CIBC World Markets) to honor a pre-sold IPO by the broker Hornblower and Weeks. Baltia sued CIBC Oppenheimer Corp. for pulling out at the last minute, however the case was unsuccessful.** In the late 90’s, CIBC (Canadian Imperial Bank of Commerce) was believed to have had concurrent interest in Star Alliance, the airline alliance network then consisting of only five airlines, one being Air Canada. A quote from the book, Straight from the Top: The Truth About Air Canada , by Robert Milton, seems to verify this belief, “Meanwhile, we were kept busy lining up the funding needed to ward off the attack. With pledges of financial support from our Star Alliance partners United Airlines and Lufthansa, I began working to bring CIBC to our side as a critical third source.” ***

At the turn of the century, things would relatively remain the same. It would still be some time before substantial change in management took effect.

To be continued...


Message From the Author:

Precise planning and execution are needed in order for a company to succeed. What we find in business, especially in entrepreneurial ventures, is that many times the founder is unfit to lead it’s company once it is established and in growth phase. There were several points in time, with regard to financing, strategic partnering, and strategic planning, that more thought out and efficient courses of action could have been taken. One could say that Balita, many times, got the short end of the stick. One could also argue, however, how much of that luck is due to the management’s choices? Although the initial management was extremely incompetent at times, the point of this is not to critique, but to understand how the company evolved, or stayed alive, until today. In the next installment, we will cover the second part of the beginning of this airline, building our understanding until we reach what I believe to be the climactic point in this to-be success story under the current management.

Sources:

* SEC '98

** Matter of Balita Air Lines, Inc. v. CIBC Oppenheimer Corp.

*** Straight from the Top: The Truth About Air Canada