Saeima gives initial green light to possible state role in rescuing airBaltic

Latvia's parliament, the Saeima, gave initial approval on Thursday to a bill that would allow the state to participate in stabilizing the finances of national carrier airBaltic. The bill has been marked as urgent.

The legislation would authorize the government to decide on several support measures. One option is for the state to buy newly issued airBaltic bridge-financing bonds worth up to €30 million, investing alongside private investors on identical terms. The Cabinet of Ministers would make a separate decision on any such purchase if needed.

Converting existing claims into equity

Another planned measure involves converting claims the state already holds into company shares. This concerns €50 million worth of bonds already owned by the state, plus the remaining portion of a state loan exceeding €18 million. The bill also envisages extending the repayment deadline for a separate €30 million state loan from the end of August to the end of this year — by July 24, the airline had repaid a total of €12.9 million in principal and interest under that loan.

The aim of the bill is to let the state act promptly and on equal footing with other shareholders, bondholders and creditors in its roles as owner, lender and bondholder. The Cabinet will report to the Saeima's Budget and Finance Committee on the progress of these measures at least quarterly.

Bondholder decisions and business plan

Separately this week, airBaltic bondholders approved several measures giving the airline more flexibility, including capitalizing rather than paying out in cash the interest due on August 14 and November 14, and granting a temporary exemption from minimum liquidity requirements until November 2026. A question on the airline's planned €225 million bridge financing was not addressed at Monday's bondholder meeting, as it was not on the agenda.

airBaltic's supervisory board has already approved a business plan envisaging up to €225 million in new debt and €100 million in new equity, with part of the existing 2029 bonds to be converted into equity. The fleet is set to shrink from 54 to 36 Airbus A220-300 aircraft by the end of this year before gradually growing to around 40 by 2031.

Last year, airBaltic Group's revenue rose 4.2% to €779.3 million, while losses fell 2.7-fold to €44.3 million. The airline carried 5.2 million passengers. The Latvian state owns 88.37% of airBaltic, Lufthansa holds 10%, and the company has for now paused its planned initial public offering of shares.