International credit rating agency Fitch Ratings has placed both Latvia’s national airline airBaltic and its secured bonds on Negative Rating Watch, according to the agency’s latest statement.
The Negative Rating Watch applies to airBaltic’s Long-Term Issuer Default Rating (IDR) of ‘CCC-‘ and to the airline’s €380 million senior secured long-term bonds, also rated ‘CCC-‘. The bonds carry a Recovery Rating of ‘RR4’.
According to Fitch, the Negative Rating Watch reflects airBaltic’s weakening financial flexibility and severe liquidity pressure. “Without additional external support, this could result in a liquidity crisis or a form of debt restructuring that could meet Fitch’s criteria for a distressed debt exchange,” the agency said.
Fitch stated that the airline’s Long-Term Issuer Default Rating reflects its “weak financial profile, unsustainably high lease-adjusted debt and weaker financial performance in 2025, which we expect to continue throughout the remainder of 2026.”
The agency believes the likelihood that airBaltic could fail to meet its financial obligations this year has increased. On 26 June, the airline failed to replenish its bond reserve account to the required level, which would have required approximately €21 million. As a result, the interest rate on the next quarterly coupon payment due on 14 August increased to 16.5%, up from 14.5% previously. Fitch said this decision signals further deterioration in the company’s liquidity position and increases the risk of a default this year.
The agency also warned that, without additional financing, the airline may need to restructure its debt later this year.
Rising fuel prices are adding further pressure to the company’s liquidity.
Assessing the Latvian government’s €30 million short-term loan granted to airBaltic in April, Fitch concluded that its impact is limited. The agency also believes that any additional capital injections from the airline’s shareholders — the Latvian state and Germany’s Lufthansa — would provide only limited long-term support. Fitch further noted that European Union state aid rules make it difficult for the government to provide substantial additional financial assistance in a timely manner.
As previously reported by LETA, the airBaltic Group posted a net loss of €70.064 million in the first quarter of 2026, 2.4 times higher than in the same period of 2025. At the same time, group revenue increased by 12.3% to €149.086 million.
The airline said its first-quarter losses were driven by foreign exchange fluctuations, financing costs, reduced commercial support and continued cost inflation across several expense categories.
For the full year 2025, the airBaltic Group generated €779.344 million in revenue, up 4.2% compared with 2024, while its annual net loss narrowed to €44.337 million, 2.7 times lower than a year earlier.
The airline carried 5.2 million passengers in 2025, representing a 1% increase compared with 2024.
Last summer, Lufthansa became a shareholder in airBaltic. The Latvian state currently owns 88.37% of the airline’s shares, Lufthansa holds 10%, Danish businessman Lars Thuesen’s company Aircraft Leasing 1 owns 1.62%, while the remaining 0.01% is held by other shareholders. The company’s share capital amounts to €41.819 million.
Under the agreement signed ahead of the planned initial public offering (IPO), Lufthansa’s final ownership stake will depend on the IPO valuation but will not fall below 5%. In August 2024, the Latvian government decided that the state must retain at least 25% plus one share in airBaltic following any future IPO.
The government also approved a €14 million equity investment in airBaltic, matching Lufthansa’s contribution ahead of the planned listing.
However, due to the airline’s 2025 financial results and current market conditions, airBaltic has suspended its planned IPO and no longer considers it a potential source of capital in 2026, according to the company’s annual report.
The report further states that, despite expected operational and commercial improvements, the airline is projected to continue generating negative free cash flow during 2026. Based on current forecasts, management expects that an additional capital injection of between €100 million and €150 million will be required to finance operations during the 2026/2027 winter season.
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