airBaltic had amassed €503 million in debt on day of Chapter 11 filing

On September 14, the day Latvia's national airline airBaltic filed for Chapter 11 restructuring in a US court, its funded debt totaled €503.3 million, according to a declaration submitted by CFO Vitolds Jakovļevs. The largest portion — about €398.2 million — stemmed from 14.5% secured bonds due in 2029. The company also owed money on a BluOr Bank loan secured by its cargo hangar at Riga Airport, plus an outstanding Latvian state loan. A further roughly €78.6 million came from finance lease obligations covering eight aircraft, seven engines and a flight simulator.

Heavy leasing burden and cash shortage

Operating lease liabilities for 46 aircraft and seven engines amounted to as much as €855.6 million. The company plans to shrink its fleet from 54 to 36 aircraft by year-end, returning about 20 surplus planes to lessors to save roughly €45 million annually. At the time of filing, airBaltic held only €1.13 million in cash. A declaration from Stefan Krastev of consultancy Seabury states that the restructuring requires roughly €350 million in fresh financing, without which the airline could not sustain operations.

Financing search and bondholder objections

Krastev cites the Covid-19 pandemic, the war in Ukraine, engine shortages and the conflict in Iran among the causes of the airline's financial troubles. After a broad outreach to potential investors involving ten interested financiers, the most favorable offer came from fund Strategic Value Partners, backed also by Barclays, Hayfin, Morgan Stanley and Oaktree. A first tranche of €140 million has already been received, part of which will go toward buying out aircraft. A group of bondholders has filed objections in court over the financing terms. The process is expected to conclude by mid-2027, while flights continue as scheduled.