airBaltic files for Chapter 11 bankruptcy protection with $405m lifeline

airBaltic, Latvia’s all-Airbus A220 airline, has filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the Southern District of New York.

The filing, made on 14 September, allows the airline to continue operating services as normal while it restructures its debt.

“Under court supervision and with protection from creditor claims, this process provides a clear framework and timetable for reaching agreements with creditors, including aircraft lessors and other stakeholders,” said Andrejs Martinovs, Chairman of the Supervisory Board of airBaltic.

“At the same time, it allows the company to continue operating. That is the central priority set for the airBaltic Management Board – to keep flying and to maintain Latvia’s connectivity.”

The airline has been struggling with fuel costs as the war in Iran has pushed up prices. However, it was already financially stretched before this impact, receiving a €30 million loan from Latvia in April and seeking approval to raise up to €257 million through new super-senior debt maturing in February 2027.

airBaltic secures financing to continue operating through Chapter 11

The airline said today that it had secured commitments for €350 million ($405 million) of debtor-in-possession financing to support operations as it goes through the restructuring, subject to court approval.

The financing was arranged by Strategic Value Partners and funded by Barclays, Hayfin Capital Management, Morgan Stanley, Oaktree Capital Management and Strategic Value Partners.

Chapter 11 is a well-established bankruptcy process that has been previously used to successfully rescue airlines, including SAS, United, Delta and GOL. Spirit Airlines famously went through the process twice before finally collapsing and ceasing all flights.

For airBaltic, the restructuring could open the door to a new future. Latvia owns 88.37% of the airline, with Lufthansa holding a 10% stake and the remainder held by private shareholders.

Reuters reported in July that the Latvian government was in discussions with a potential strategic investor.

“We have to go through necessary steps in order to make the company ready for a strategic investor,” Prime Minister Andris Kulbergs said at the time.

Chapter 11 does not guarantee that a healthy airline will emerge. However, it gives airBaltic an opportunity to renegotiate its debts, aircraft leases and other obligations through a court-approved restructuring plan. Reducing those liabilities could also make the airline a more attractive investment prospect.

airBaltic flights to continue operating normally

For airBaltic passengers, there should be no immediate or noticeable change to the way the airline is operating.

airBaltic plans to operate all the flights it has scheduled, and continues to sell tickets for future services.

“Our focus is on continuing to run the airline while implementing the changes set out in our new business plan,” said Erno Hildén, President and Chief Executive Officer of airBaltic. “For our passengers, our operations continue as normal – the process does not affect their travel experience and is not noticeable to them – we are flying, selling tickets and planning our future schedule, with the same focus on safety and operational reliability.”

The next steps will include securing court approval for the financing and negotiating a restructuring plan with creditors, aircraft lessors and other stakeholders. The final shape of airBaltic’s fleet and network has not yet been confirmed, although its revised business plan is expected to concentrate operations around Riga, optimise the size and use of its Airbus A220-300 fleet and reduce its underlying cost base.

For passengers, the immediate message is that airBaltic remains in the air. Whether Chapter 11 can put it on a sustainable financial footing will depend on the concessions it secures from creditors and whether it can attract the long-term investment it has been seeking.