The Latvian parliament on Thursday gave its preliminary approval to possible state participation in the financial stabilisation of national airline airBaltic, including the potential purchase of up to thirty million euros in bridge-financing bonds and the conversion of fifty million euros in existing bonds into equity.
The bill has been designated as urgent.
The legislation would authorise the government to potentially participate in the purchase of up to thirty million euros in airBaltic bridge-financing bonds alongside private investors and on identical terms. The Cabinet of Ministers would be able to make a separate decision on purchasing the bonds if necessary.
The plan also provides for converting claims arising from a state loan and bonds already held by the state into the airline’s share capital. This means that fifty million euros in state-owned bonds and more than eighteen million euros remaining under the state loan could be converted into airBaltic shares.
The repayment deadline for the thirty-million-euro state loan is also expected to be extended from the end of August until the end of this year. By July 24, airBaltic had repaid a total of 12.9 million euros in principal and contractual interest payments on the state loan.
This week, airBaltic bondholders approved the capitalisation of the next two bond interest payments, as well as several other measures giving the airline additional flexibility in implementing its revised business plan.
Bondholders approved adding the interest payments due on August 14 and November 14 this year to the principal amount of the bonds instead of paying them in cash. They also approved a temporary waiver of minimum liquidity requirements until November 2026.
Meanwhile, airBaltic’s planned raising of 225 million euros in bridge financing was not considered at the bondholders’ meeting on Monday, August 17, because the issue was not included on the agenda.
The purpose of the bill is to establish measures for airBaltic’s financial stabilisation and ensure effective management of the state’s financial interests during the process. It would allow the state, as a shareholder, creditor and bondholder, to act in a timely and coordinated manner and on an equal footing with the airline’s other shareholders, bondholders and creditors.
One or more of the measures set out in the bill could be implemented to stabilise airBaltic’s finances. Decisions on individual measures would be taken by the Cabinet of Ministers, which would determine their scope, implementation conditions and other relevant terms.
Among the measures envisaged is an amendment to the agreement covering the thirty-million-euro state loan to the airline, extending the deadline for repayment of the outstanding principal, accrued interest and other obligations arising from the agreement.
The bill also provides for the full or partial conversion into equity of any claims arising from the thirty-million-euro state loan granted to airBaltic.
Another possible measure would allow claims arising from airBaltic bonds held by the state to be capitalised, converted or otherwise restructured up to the actual outstanding principal amount of those bonds, but not exceeding fifty million euros, plus the relevant accrued interest and other claims arising from the bonds.
The bill also states that the state could participate in providing bridge financing to airBaltic by purchasing up to thirty million euros in newly issued airBaltic bonds.
The newly issued bonds would be purchased in accordance with the bond issue documentation, including the prospectus and instructions from the issue arrangers. The Ministry of Transport would be responsible for preparing financial, legal, fiscal and state-aid assessments, as well as the terms of the bridge-financing transaction.
The Cabinet of Ministers would be required to report to the Saeima Budget and Finance Committee on the implementation of the financial stabilisation measures at least once every quarter.
As previously reported, airBaltic’s Supervisory Board has approved a business plan that includes raising 225 million euros in interim financing to improve liquidity, using the existing collateral package securing its 2029 senior bonds.
In the longer term, the plan envisages recapitalising the company through up to 225 million euros in new debt and 100 million euros in new equity. Part of the existing 2029 bonds would be converted into shares in the company, while the remainder would be replaced with new, smaller debt of up to 125 million euros.
The business plan also envisages airBaltic operating 36 Airbus A220-300 aircraft by the end of 2026, compared with 54 aircraft currently, with the fleet gradually increasing to around 40 aircraft by 2031.
The airBaltic Group generated revenue of 779.344 million euros last year, an increase of 4.2% compared with 2024. The group posted a loss of 44.337 million euros, which was 2.7 times lower than in 2024. In 2025, the airline carried a total of 5.2 million passengers, an increase of 1% compared with 2024.
German flag carrier Lufthansa became an airBaltic shareholder last summer. The Latvian state currently owns 88.37% of airBaltic, Lufthansa holds 10%, Danish businessman Lars Thuesen’s Aircraft Leasing 1 owns 1.62%, and other shareholders hold the remaining 0.01%. The company’s share capital stands at 41.819 million euros.
In light of its 2025 financial results and current market conditions, airBaltic has suspended its potential initial public offering and does not currently consider an IPO a potential source of capital in 2026, according to the airline’s annual report.
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