If Latvia’s national airline airBaltic fails to attract a major strategic investor, the country could face significant long-term consequences and a substantial impact on its economy, warns Raitis Logins, Managing Partner of Grant Thornton Baltic in Latvia.
According to Logins, following the unsuccessful initial public offering (IPO) process and Lufthansa’s decision not to take on a larger role in the airline’s development, the Latvian government is now making what may be its final attempt to secure a strategic investor capable of preserving airBaltic as a company of national importance, the leading regional carrier and the anchor airline at Riga Airport.
“If this scenario fails, Latvia will have to deal with serious long-term consequences, including a significant impact on the economy resulting from the loss of its status as a regional leader in passenger aviation,” Logins said.
He argued that the government has effectively chosen to make one last effort to attract an investor willing to continue developing airBaltic as a regional aviation player rather than exploiting the company’s most valuable asset—its aircraft fleet—for short-term financial gain.
“Given the airline’s current financial indicators, there is no longer any basis for continuing the IPO process
or discussing the creation of a Baltic joint airline. If attracting a strategic investor fails, the state’s ability to preserve the company’s existing business model, which has been in place for the past decade, will be extremely limited,” Logins said.
Based on publicly available information, airBaltic is currently seeking additional short-term financing from its existing bondholders to maintain liquidity until a potential strategic investor is secured. The airline faces several pressing financial challenges in the near future, including repayment of a state loan, meeting bond reserve account requirements and securing funding for the upcoming winter season.
“In corporate finance, strategic investors do not usually invest in companies that are on the verge of technical default. Short-term financing is therefore not the final solution but rather a necessary bridge that allows the company to remain stable while investors evaluate a long-term investment,” Logins explained.
He added that
support from existing bondholders at this stage could send a positive signal to potential investors
by demonstrating that creditors have confidence in airBaltic’s future and are willing to provide the time needed to restructure the airline’s capital and complete a strategic investment transaction.
According to Logins, airBaltic’s future is about much more than one company.
“This is a question of Latvia’s aviation connectivity, the competitiveness of Riga Airport and the country’s ability to maintain regional economic infrastructure. That is why it is crucial to find a solution that enables the airline to continue developing in Latvia’s interests,” he said.
As the government hopes to complete a strategic investment deal as early as this autumn, airBaltic requires additional funding immediately to ensure business continuity until the transaction is finalised. Logins said several temporary financing options are currently being considered, including super-priority notes, which would give new lenders repayment priority over the airline’s existing 380 million euros bond issue, convertible bridge debt, which could later be converted into equity or long-term financing under certain conditions, and a liquidity facility, under which existing bondholders would provide additional funding in proportion to their holdings.
He described these instruments as a temporary financial bridge
designed to maintain the airline’s stability until a strategic investor is secured and its long-term capital structure is strengthened.
As previously reported, on the 30th of July the Latvian government authorised the State Treasury to represent the state at a meeting of airBaltic bondholders scheduled for the 3rd of August, where the airline plans to seek short-term financing from existing investors.
airBaltic has been working for some time to stabilise its financial position by revising its business plan and seeking new investors and financing.
The airline’s annual report shows that airBaltic Group’s revenue increased by 4.2% in 2025 to 779.3 million euros, while its net loss narrowed to 44.3 million euros, 2.7 times lower than in 2024. The airline carried 5.2 million passengers during the year, up 1% from the previous year.
Germany’s national airline Lufthansa became an airBaltic shareholder last summer.
The Latvian state currently owns 88.37% of the airline, Lufthansa holds 10%, Danish businessman Lars Thuesen’s company Aircraft Leasing 1 owns 1.62%, and the remaining 0.01% is held by other shareholders.
Under the agreement signed before the planned IPO, Lufthansa’s final ownership stake will depend on the eventual IPO valuation, but it is guaranteed to retain at least 5% of the airline after the listing. The Latvian government has also agreed that, following any future IPO, the state must retain at least 25% plus one share in airBaltic.
In August 2025, the government also approved a 14 million euros co-investment in airBaltic, matching Lufthansa’s contribution ahead of the planned IPO.
However, following its 2025 financial results and changing market conditions, airBaltic has suspended its planned IPO and no longer considers it a realistic source of capital in 2026, according to its annual report.
The report also states that, despite expected improvements in operational and commercial performance, the airline is projected to generate negative free cash flow in 2026. Based on current forecasts, management expects that an additional 100–150 million euros capital injection will be required to finance operations during the 2026/2027 winter season.
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