Through the latest move, the airline now seeks to restructure its debt pile and survive a deepening sector-wide crisis brought on by the Iran war.

AirBaltic has secured a commitment for 350 million euro (USD 405 million) in financing from lenders including Strategic Value Partners, Barclays, Hayfin Capital Management, Morgan Stanley and Oaktree Capital Management to support its operations during the restructuring.

AirBaltic CEO Erno Hilden announced at a press conference that the court must approve the funding, which carries a rate of approximately 12%.

“In the coming months, we will engage with all our stakeholders to agree on sustainable terms,” he said, adding that the company is looking at a 44 million euro profit improvement annually.

AirBaltic said flights would operate as scheduled during the court-supervised process which the flag carrier expects to finish by June 2027.

A volatile Middle East has caused jet fuel prices ⁠to shoot up significantly since March this year, sparking the air travel sector’s worst crisis since the COVID-19 pandemic.

While investors and executives have been warning that carriers with stretched balance sheets risk collapse, American low-cost carrier Spirit Airlines became the first one to shut down its operations in May 2026.

AirAsia, South-east Asia’s largest budget carrier, on the other hand, is seeking fresh capital.

“AirBaltic has been experiencing acute financial stress due to a combination of financial and geopolitical factors,” the airline’s board wrote in a filing with the bankruptcy court.

The Latvian carrier has approximately USD 583 million in funded debt and finance lease liabilities, and it owes 106 million euro in payroll taxes and airline taxes and fees. Its 2025 revenue was approximately 779 million euro.

The Latvian government holds the majority ownership of AirBaltic, which operates a fleet of approximately 50 Airbus A220-300 planes, while Germany’s Lufthansa owns a 10% minority stake.

In the lead-up to the bankruptcy filing, AirBaltic’s bondholders were due to vote on the company’s plan to raise up to 257 million euros through new super-senior debt due in February 2027, at a rate of 25%.

Latvian Prime Minister Andris Kulbergs said the Chapter 11 proceedings were initiated after bondholders with over 70% of the value of the debt decided to opt for liquidation instead.

“I view this solution as one of the best options ‌for ensuring ⁠airBaltic’s viability, as it provides the necessary tools and time to implement the restructuring plan,” Kulbergs said.

“The government is continuing to look for a strategic investor as airBaltic reduces its fleet and reorganises its obligations,” he added.

Hilden, who led Scandinavian airline ⁠SAS through its Chapter 11 proceedings from 2022 to 2024, said AirBaltic is “targeting the same process.”

The airline had aimed to grow its fleet to 100 planes and was expecting to develop transit traffic from Russia, Belarus and Ukraine through Riga.

However, the ongoing Russia-Ukraine war has also hindered the roadmap.

As per Prime Minister Kulbergs, by April 2026, AirBaltic had “burned through” 380 million euro raised via bonds issued in 2024.

Another 30 million euros in emergency government loans ran out in June. As a response, the airline was looking to lease out its excess aircraft.

“Serving Baltic and Latvian routes requires only 30 aircraft, not 100,” Kulbergs concluded.

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