airBaltic Files for Chapter 11 Bankruptcy, Secures $404 Million in Debtor-in-Possession Financing

On September 14, 2026, Latvian flag carrier airBaltic filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Southern District of New York, simultaneously securing €350 million ($404 million) in debtor-in-possession (DIP) financing.

The legal maneuver immediately shields the airline from creditor claims while guaranteeing that its daily operations across Europe and the Middle East continue without interruption. The new capital injection replaces a previously negotiated, high-interest emergency loan, providing the airline with the liquidity required to maintain its flight schedules while it restructures its balance sheet.[1][2][5]

For the traveling public—whether a Riga resident booking a holiday or a Baltic business owner relying on regional cargo links—the transition into bankruptcy proceedings brings no immediate changes. The airline's management confirmed that all passenger reservations, flight schedules, and customer service operations remain fully active.

"The central priority set for the airBaltic Management Board – to keep flying and to maintain Latvia's connectivity," stated Andrejs Martinovs, chairman of the airline's supervisory board. Refunds, vouchers, and gift cards will continue to be processed under existing policies, ensuring that passengers planning their next trip face no disruption at the ticket counter or the boarding gate.[1][3][4]

The $404 million DIP financing package was arranged by Strategic Value Partners, with participation from major global lenders including Barclays, Hayfin Capital Management, Morgan Stanley, and Oaktree Capital Management. According to court filings, the loan carries an interest rate tied to the Secured Overnight Financing Rate (SOFR) plus 8 percent, bringing the effective annual rate to approximately 12 percent. This capital, combined with the cash generated from ongoing ticket sales, provides airBaltic with a secure financial runway to operate normally throughout the court-supervised restructuring process.[1][2]

The decision to enter Chapter 11 followed the collapse of an alternative private financing plan that would have imposed punishing costs on the airline. Earlier in September, airBaltic had tentatively secured €257 million ($297 million) in emergency bond financing backed by London-based Polus Capital Management and Israel's Klirmark Capital. However, that proposal demanded a 25 percent annual interest rate on the newly issued bonds. While the airline's board initially viewed the private bond issuance as the most deliverable option, the sheer cost of the capital forced a strategic pivot.[2]

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The Latvian government, which holds a significant stake in the national carrier on behalf of taxpayers, strongly opposed the 25 percent interest rate. Latvian Prime Minister Andris Kulbergs publicly criticized the terms, noting that while the €257 million loan might provide a short-term liquidity fix, it would fail to resolve the airline's underlying structural issues with legacy debts and aircraft lease obligations.

"The government required a solution that would enable airBaltic to operate in the future without the need for repeated emergency loans," Kulbergs stated, effectively endorsing the Chapter 11 route as a move that protects the national budget from funding endless bailouts.[2]

The acute financial stress that pushed airBaltic into bankruptcy stems from a convergence of geopolitical and supply-chain crises. In its court filings, the airline noted that its liquidity position had deteriorated rapidly following a €30 million ($34.6 million) state loan received in April 2026. The primary driver of this cash burn was the sudden spike in global jet fuel prices, triggered by the escalating conflict in Iran. As fuel costs surged, the airline's operating margins evaporated, leaving it unable to meet its looming debt obligations.[2][4]

Compounding the fuel crisis were ongoing operational disruptions tied to airBaltic's fleet of Airbus A220-300 aircraft. The airline has aggressively built an all-A220 fleet over the past decade, a strategy that left it highly exposed to the widespread powder metal defects plaguing Pratt & Whitney's Geared Turbofan (GTF) engines. The resulting maintenance bottlenecks forced airBaltic to ground portions of its fleet, reducing the number of available seats for Baltic travelers exactly when the airline needed to maximize ticket revenue to cover its rising fuel and debt servicing costs.[2][4]

By filing in the Southern District of New York rather than in Europe, airBaltic is utilizing a legal framework specifically designed to keep complex international businesses running while they reorganize. The U.S. Chapter 11 process is widely favored by global aviation companies—including recent filings by Scandinavian Airlines (SAS) and Spirit Airlines—because it provides predictable, court-enforced protection against aircraft lessors attempting to repossess planes. A European insolvency proceeding, by contrast, is often geared more toward winding down a company's assets rather than preserving it as an operating entity.[1][4][5]

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"We have carefully assessed the restructuring options available to the company, with one priority in focus - to give airBaltic the best possible basis to continue operating and to build a sustainable financial structure," Martinovs explained in his written statement. The Chapter 11 protection provides a clear timetable for the airline to renegotiate terms with its existing bondholders, who currently hold roughly 70 percent of the company's debt. Previous negotiations with these creditors regarding collateral recovery had stalled, making court intervention necessary.[1][2]

The restructuring process is expected to last until June 2027. During this period, airBaltic plans to streamline its operations, potentially reducing its overall fleet size and refocusing its route network around its core hub in Riga. By utilizing the $404 million in DIP financing to bridge the gap, the airline aims to emerge from bankruptcy next summer with a substantially lighter debt load, a competitive cost structure, and the financial stability required to navigate the volatile European aviation market.[1][2][4]