Fitch places airBaltic on negative rating watch, citing weak financial flexibility

Fitch Ratings has assigned a negative rating watch to airBaltic's long-term issuer default rating of CCC- and its €380 million secured bonds, also rated CCC-. The recovery rating is RR4.

The agency said the negative watch reflects the airline's weakening financial flexibility and acute liquidity pressure. Without further external support, airBaltic could experience a liquidity crisis or a form of debt restructuring that would meet Fitch's criteria for distressed debt exchange.

AirBaltic's financial stress was highlighted in June when it failed to fund a reserve account for its bonds to the required level of about €21 million. This resulted in a higher quarterly interest payment of 16.5% in August, up from 14.5%. Fitch sees this as a sign of increasing default risk this year.

A €30 million short-term loan from the Latvian state in April has had limited impact, according to Fitch. Additional investment from existing owners – Latvia and Lufthansa – would also face sustainability challenges, and EU rules restrict timely state support.

In the first quarter of 2026, airBaltic's consolidated loss widened to €70.1 million, 2.4 times larger than a year earlier, while revenue rose 12.3% to €149.1 million. For full-year 2025, the airline reported a loss of €44.3 million on revenue of €779.3 million. It carried 5.2 million passengers in 2025.

AirBaltic has suspended its planned initial public offering (IPO) and no longer considers it a potential capital source for 2026. The company expects negative free cash flow in 2026 and will need an additional €100-150 million to fund operations through the 2026/2027 winter season.