Latvia’s national carrier, airBaltic, has voluntarily filed for protection under Chapter 11 of the U.S. Bankruptcy Code in New York on Monday, September 14, as the airline struggles to navigate a deepening financial crisis driven heavily by soaring fuel costs and geopolitical fallout. According to court filings and company announcements, the airline is wrestling with acute financial stress as the U.S. war with Iran causes jet fuel prices to double, sparking what industry executives describe as the air travel sector’s worst crisis since the COVID-19 pandemic.
As airBaltic pursues a court-supervised restructuring to manage its roughly $583 million in funded debt and finance lease liabilities, leadership insists that day-to-day operations will continue without disruption. Passengers holding valid tickets can continue to book and fly as scheduled, with the carrier expecting to complete the reorganisation process by June of next year. However, the sweeping financial overhaul involves significant cutbacks across the airline’s fleet, workforce, and future aircraft orders.
Financing and Fleet Reductions
To keep planes in the air during the restructuring, airBaltic secured a commitment for €350 million (approximately $405 million) in new financing from a group of lenders including Strategic Value Partners, Barclays, Hayfin Capital Management, Morgan Stanley, and Oaktree Capital Management. Speaking at a press conference, airBaltic CEO Erno Hilden noted that the funding carries an interest rate of about 12% and remains subject to court approval. The airline aims to achieve a €44 million profit improvement annually through these aggressive measures.
As part of its Chapter 11 filing, airBaltic plans to cancel or defer outstanding deliveries tied to a $3.5 billion order for 40 additional Airbus planes, alongside $106.7 million worth of additional aircraft engines from Pratt & Whitney. The carrier has already initiated discussions with Airbus to push back deliveries slated for after this year. Furthermore, the airline confirmed plans to shrink its overall fleet from 54 aircraft down to 36 by the end of 2026, with the largest operational changes expected to hit its wet-lease business, which traditionally loans out planes and crews to other carriers for a fee.
Government Backing and Workforce Impact
The airline is majority-owned by the Latvian government, with Germany’s Lufthansa maintaining a 10% minority stake. Latvian Prime Minister Andris Kulbergs explained that Chapter 11 proceedings became necessary after bondholders representing over 70% of the debt value opted for liquidation rather than alternative debt proposals. Kulbergs described the U.S. court filing as “one of the best options for ensuring airBaltic’s viability,” providing the legal framework and time needed to reorganize.
The financial strain also extends to the company’s workforce. Hilden confirmed that management is currently engaged in consultations with labor unions regarding workforce adjustments, a move described as a natural consequence of the airline’s scaled-back capacity plans. Having expanded globally over the past decade, airBaltic currently employs more than 3,000 people. Alongside its funded debt, court documents show the carrier owes €106 million in payroll taxes, airline taxes, and fees, against a 2025 revenue footprint of roughly €779 million.
Guidance for Travellers Amid Bankruptcy
The use of the term “bankruptcy” has triggered concern among international passengers, particularly in the United Kingdom, where airBaltic operates direct services from London Gatwick alongside a seasonal route between Aberdeen and Riga. Aviation experts, including AirAdvisor CEO Anton Radchenko, have urged travellers not to panic-cancel their journeys. Because Chapter 11 is designed to give an operating company breathing room to reorganize its debts, valid tickets remain active and flights continue to run.
Radchenko cautioned that voluntary cancellations could strip passengers of statutory rights and subject them to strict fare penalties, whereas waiting for an official airline cancellation preserves reimbursement or rerouting options under UK261 or EU passenger-rights regulations. Financial protection ultimately depends on how the ticket was purchased, as direct airline bookings generally lack standalone ATOL protection, leaving travellers reliant on credit card chargebacks, Section 75 provisions, or existing travel insurance.
As airBaltic moves forward, the Latvian government continues its search for a strategic investor. Stakeholders will negotiate sustainable terms over the coming months to secure the long-term future of the carrier as it attempts to rebound from unprecedented geopolitical cost pressures.
This article is provided for informational purposes only and does not constitute professional financial or legal advice.
