AirBaltic files for Chapter 11 bankruptcy as Iran war costs bite

Latvia's airBaltic has voluntarily filed for Chapter 11 bankruptcy protection in the United States, as it seeks to restructure its debt and navigate a crisis caused by the ongoing Iran war. The airline secured a €350 million ($405 million) financing commitment from lenders including Strategic Value Partners, Barclays, Hayfin Capital Management, Morgan Stanley, and Oaktree Capital Management to support its operations during the restructuring process. The funding is subject to court approval and comes with an interest rate of around 12%.

AirBaltic CEO Erno Hilden announced that the company will engage with all stakeholders to agree on sustainable terms during the court-supervised process, which is expected to conclude by June of next year. AirBaltic aims to improve its profit by €44 million annually. The airline currently operates a fleet of 50 Airbus A220-300 planes and has approximately $583 million in funded debt and finance lease liabilities.

It also owes €106 million in payroll taxes and airline taxes and fees, with 2025 revenue projected at €779 million.

The Iran war has led to a doubling of jet fuel prices, triggering the travel sector's worst crisis since the COVID-19 pandemic. Many airlines, facing stretched balance sheets, now risk collapse. AirBaltic's financial troubles stem from a combination of financial and geopolitical factors, as stated in the airline's filing with the bankruptcy court.

The company has approximately $583 million in funded debt and finance lease liabilities, with €106 million in outstanding payroll taxes, airline taxes, and fees. Its 2025 revenue is projected at €779 million.

Latvian Prime Minister Andris Kulbergs stated that the Chapter 11 proceedings were initiated after bondholders with over 70% of the debt's value opted for liquidation instead of a new financing plan. The government remains committed to seeking a strategic investor as airBaltic reduces its fleet and reorganizes its obligations. The airline, which has a majority ownership by the Latvian government and a 10% stake held by German carrier Lufthansa, is the second airline to face bankruptcy due to the Iran war, following Spirit Airlines.