Air Baltic files for Chapter 11

Air Baltic has filed for Chapter 11 protection in a court in New York. The aim is to gain time to restructure the company's debts and secure sustainable long-term financing. This is reported by Reuters.

Flight operations will continue during the process, and airBaltic expects to emerge from Chapter 11 by June 2027 at the latest. The company has also secured financing of €350 million, equivalent to around $405 million, from a group of lenders including Barclays, Morgan Stanley, Oaktree Capital Management, Hayfin Capital Management and Strategic Value Partners. 

The background is a prolonged period of financial pressure, which has been worsened by the ongoing war between the US and Iran. Sharply rising fuel prices have hit the airline hard. Reuters reports that the price of jet fuel has doubled since the crisis escalated.

The financing collapsed

Before Chapter 11, Air Baltic had tried to resolve the acute liquidity crisis through new loans. The company needed around €156 million in short-term financing, according to Fitch Ratings.

The plan was to raise up to €257 million through so-called super-senior financing. The new debt would have taken priority over existing bonds, leading to sharply rising yields on Air Baltic's outstanding bonds. 

When bondholders did not provide their support, Chapter 11 remained the alternative.

From 100 to significantly fewer aircraft?

Air Baltic has around 50 Airbus A220-300 aircraft in its fleet. Before the crisis, the ambition was to grow to around 100 aircraft and expand Riga as a regional hub.

That plan is now being questioned.

The company has already been affected by an engine shortage that has kept parts of the fleet grounded. In addition, airBaltic has been forced to cancel profitable flights to Dubai. The war and rising fuel costs have made the financial situation acute. 

According to Reuters, analysts believe that Air Baltic is likely to scale back its operations. One important change is that the markets the company had previously relied on for transfer traffic via Riga – above all Russia, Belarus and Ukraine – no longer exist in the same way.

Important for Arlanda

Air Baltic is also a significant player in the Swedish market. From Stockholm Arlanda, the company currently sells tickets to Riga, Tallinn, Vilnius, Palanga, Helsinki, Tampere and several other destinations. 

This means that any future reduction in the fleet could also have consequences for the Swedish aviation market.

However, no immediate changes have been announced. Air Baltic states that flights will continue as planned during the Chapter 11 process. 

The Latvian state seeks investors

The Latvian state is the majority shareholder in Air Baltic, while Lufthansa owns around 10 per cent. The government has supported the stabilisation of the company while also seeking a strategic investor.