AirBaltic files for Chapter 11 bankruptcy as Iran war costs bite

Latvia's national carrier airBaltic has filed for Chapter 11 bankruptcy protection in the United States, citing the ongoing Iran conflict as a major factor contributing to the airline's financial struggles. The move comes as the war has led to a doubling of jet fuel prices, causing a severe crisis in the aviation industry, the worst since the COVID-19 pandemic.

To navigate this challenging period, airBaltic has secured a €350 million ($405 million) financing commitment from several lenders, including Strategic Value Partners, Barclays, Hayfin Capital Management, Morgan Stanley, and Oaktree Capital Management. These funds will help the airline manage its operations during the bankruptcy proceedings.

The decision to file for bankruptcy protection was made to protect airBaltic from its creditors while it negotiates a restructuring of its debt obligations. Despite this move, the airline assures that flights will continue to operate as scheduled throughout the court-supervised process.

AirBaltic, which is majority owned by the Latvian government, attributes its deteriorating liquidity position to the rising fuel costs resulting from the Iran conflict. The airline had already secured a €30 million state loan in April to mitigate its financial pressures. The situation has become so dire that other airlines, such as AirAsia, have also been forced to seek additional capital due to mounting financial challenges caused by soaring jet fuel costs and substantial foreign exchange losses.