On the 14th of September this year, when Latvia’s national airline airBaltic filed for restructuring under Chapter 11, its funded debt stood at 503.3 million euros, while its operating lease liabilities amounted to 855.6 million euros, according to a declaration submitted to the court by airBaltic Chief Financial Officer Vitolds Jakovļevs.
The funded debt included approximately 398.2 million euros in liabilities related to 14.5% secured bonds maturing in 2029. Of this amount, the principal stood at 393.8 million euros, while accrued and unpaid interest amounted to approximately 4.4 million euros.
Another approximately 7.9 million euros consisted of a loan from BluOr Bank secured by airBaltic’s cargo hangar at Riga Airport and the land-use rights related to its construction. The debt also included an outstanding Latvian state loan of approximately 18.6 million euros.
The airline also had approximately 78.6 million euros in finance lease liabilities related to eight aircraft, seven engines and a flight simulator.
According to an assessment by airBaltic’s financial adviser Seabury,
purchasing these assets using debtor-in-possession (DIP) financing could unlock approximately 170 million euros
in equity value in the aircraft and engines.
Meanwhile, operating lease liabilities for 46 aircraft and seven engines amounted to 855.6 million euros.
Jakovļevs states in the declaration that, under the business plan, airBaltic intends to reduce its fleet from 54 to 36 aircraft by the end of this year by returning approximately 20 surplus aircraft, reducing lease costs and achieving annual cost savings of approximately 45 million euros.
At the same time, airBaltic had just 1.13 million euros in cash on hand on the day it filed for Chapter 11, according to a declaration submitted to the court by Stefan Krastev, Vice Chairman of financial advisory firm Seabury Global Aviation Advisors.
Krastev’s declaration states that
airBaltic requires approximately 350 million euros in new financing to carry out the restructuring process.
Without immediate access to financing, the airline would be unable to maintain its day-to-day operations, would be forced to suspend flights and would ultimately face liquidation, Krastev stresses.
He cites the consequences of the Covid-19 pandemic, the impact of Russia’s war in Ukraine, shortages of Pratt & Whitney engines and resulting aircraft groundings, as well as rising fuel prices linked to the conflict in Iran, as the main reasons behind airBaltic’s financial difficulties.
During the summer of 2026, airBaltic and its advisers approached bondholders, restructuring funds and other potential lenders. Offers were received from four potential financing providers, but none offered sufficient funding to meet the company’s needs or acceptable terms.
Krastev adds that
a group of bondholders also offered financing, but the proposal included very strict conditions,
an extremely high cost, priority over all other creditors and operational requirements that could have disrupted flight operations.
In Krastev’s assessment, the proposal was too expensive, did not provide enough time to complete the restructuring and offered insufficient benefits to rescue the company.
He notes that a broad investor outreach process began in mid-August. Strategic Value Partners (SVP) played a particularly significant role. Ten potential financing providers signed confidentiality agreements and conducted due diligence on the company.
Investors were provided with information about airBaltic’s financial position, fleet, business plan, cash flow and restructuring strategy. Several proposals were subsequently received.
Krastev stresses that almost all potential lenders imposed three requirements: aircraft lease liabilities had to be repaid first, lenders had to receive first-priority security interests, and
future financing had to be secured before subsequent loan tranches could be disbursed.
He concludes that the company considered several financing options, but in his assessment SVP’s proposal provides the necessary liquidity, gives airBaltic more time to implement its restructuring and allows the company to use the advantages of the Chapter 11 process to maintain its operations.
LETA previously reported that airBaltic had begun restructuring its financial liabilities under the Chapter 11 procedure provided for under US law.
In total, airBaltic has received binding commitments from financing providers to make available up to 350 million euros in new debtor-in-possession financing to provide liquidity and maintain operations during the Chapter 11 process.
airBaltic has currently received the first financing tranche of 140 million euros,
of which 78.925 million euros will be used to purchase eight aircraft and seven engines.
The financing was arranged by SVP and has been committed by Barclays, Hayfin Capital Management, Morgan Stanley, Oaktree Capital Management and Strategic Value Partners. The interest rate is SOFR plus 8%, currently equivalent to approximately 12%, while the financing arrangement also includes additional fees of up to 52.5 million euros.
As a result, the previous plan to raise up to 257 million euros from bondholders at an annual interest rate of 25% will not be implemented.
At the same time, the Ad Hoc Group of bondholders, which owns part of airBaltic’s 14.5% secured bonds maturing in 2029, has filed objections with the court over the way the DIP financing is being secured and the extent to which bondholders’ rights are being diminished.
Chapter 11 protects airBaltic from creditor claims until the restructuring of its liabilities is completed.
The company also says that flights and customer service will continue as usual. All flights will operate according to the planned schedule, existing tickets and reservations remain valid, and passengers can continue to purchase tickets and travel with airBaltic as before.
The process is expected to result in a reorganisation plan that will require court approval. The restructuring is expected to be completed by mid-2027.
It has also been reported that airBaltic bondholders in August approved the capitalisation of the next two bond interest payments, as well as several other measures providing the airline with additional flexibility in implementing its revised business plan.
Bondholders agreed that interest payments due on the 14th of August and the 14th of November this year would be added to the bond principal rather than paid in cash. A temporary waiver of minimum liquidity requirements until November 2026 was also approved.
Last year, airBaltic Group’s revenue increased by 4.2% compared with 2024,
reaching 779.344 million euros. The Group recorded losses of 44.337 million euros, 2.7 times lower than in 2024.
In 2025, the airline carried a total of 5.2 million passengers, 1% more than in 2024.
Last summer, German national airline Lufthansa became a shareholder in airBaltic. The Latvian state currently owns 88.37% of airBaltic shares, Lufthansa holds 10%, Aircraft Leasing 1, owned by Danish businessman Lars Thuesen, holds 1.62%, while other shareholders own the remaining 0.01%.
The company’s share capital amounts to 41.819 million euros.
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