airBaltic files for Chapter 11 in New York with €350 million of new financing

The Republic of Latvia holds 88.37% of airBaltic. Prime Minister Andris Kulbergs had dismissed a proposed loan of up to €257 million at 25% a year as a short-term patch. On Monday the flag carrier moved that negotiation from Riga into the U.S. Bankruptcy Court for the Southern District of New York, filing for Chapter 11 with a committed €350 million debtor-in-possession facility arranged by Strategic Value Partners, with Oaktree Capital Management, Hayfin Capital Management, Barclays and Morgan Stanley among the lenders. Passengers were told to do nothing.

Air Baltic Corporation AS filed with two subsidiaries, Air Baltic Training and Baltijas Kravu Centrs, the cargo handler. The petition estimates between 10,001 and 25,000 creditors, with Pratt & Whitney holding the largest unsecured claim, at $66.5 million. The airline, which conducts no flights to or within the United States, said tickets, reservations, vouchers and credits remain valid and that the day’s Airbus A220-300 schedule still stands. Existing management stays in place. Suppliers, it said, will be paid in the ordinary course.

The committed loan is the kind a bankruptcy court can put first in line to be repaid. The rate is SOFR plus 8%, about 12% at current levels, the airline said. A judge still has to approve it. Combined with cash from operations, airBaltic said the facility should fund the carrier through the case, which it aims to finish around June 2027.

Kulbergs called Chapter 11 “a protective shield” that finally addresses “the core of the problem,” and said the government wanted a path that did not require repeated emergency loans. He said talks with bondholders holding 70% of the debt had been difficult. Seabury Securities advised on the plan. Latvia chose a Manhattan courtroom over an EU insolvency proceeding because, it said, its financing, aircraft leases and creditors are international, the same path Scandinavian Airlines took.

A balance sheet that was already underwater

The filing did not arrive on a healthy carrier. In its unaudited accounts as of March 31, airBaltic reported €1.55 billion of assets and negative equity of €249.3 million. Current liabilities exceeded current assets by €415.1 million. Cash was €32.9 million, of which only €15.6 million was unrestricted; the rest sat in a bond-service reserve. Lease liabilities were €883.8 million. The first quarter produced a net loss of €70.1 million.

Deutsche Lufthansa AG holds 10%, a stake taken on June 30, 2025 that did not change control. Latvia extended a €30 million short-term loan in April. A listing once hoped for in 2025 never arrived.

The expensive claim in the stack is the €380 million of 14.50% senior secured notes due in 2029, issued as €340 million in May 2024 and tapped by €40 million that October. At that coupon the notes imply about €55 million of annual interest. On August 17, holders agreed to capitalize the coupons due August 14 and November 14 rather than take cash, and to waive the minimum-liquidity test until November 14. That bought weeks, not a capital structure.

Reuters reported on Thursday, September 10, that those notes had fallen on Wednesday, driving up yields as much as 176% on LSEG data. No post-filing price was available in early New York hours on Monday.

In its August 11 business plan, airBaltic proposed converting part of those 2029 notes into equity, raising €100 million of new equity, and replacing the rest of the notes with up to €125 million of reduced debt. That is the mechanism by which a carrier already €249.3 million underwater would dilute Latvia’s 88.37% and Lufthansa’s 10%. The Chapter 11 case is now the court in which that transfer gets negotiated. The DIP lenders sit senior once a judge blesses the loan; unnamed aircraft lessors sit in the same proceeding.

Fuel, engines, and a smaller A220 fleet

airBaltic’s own statement framed Chapter 11 as a way to cut obligations and build a more sustainable capital structure. It did not blame Brent crude, the Iran war, or jet fuel. Reuters, reporting the same filing, described the carrier as the second airline casualty linked to the war after Spirit Airlines collapsed in May, and said jet fuel prices have doubled. Those are separate claims. The accounts support a narrower point: this was a thin, lease-heavy, high-coupon airline with little cash.

Brent crude was at $108.43 a barrel at 7:56 a.m. Eastern on Monday, up $3.82, or 3.7%, on the day. It is up 22.5% over the past month and 78% this year.

The last published fuel-hedge snapshot is the first-quarter statements issued in May. During that quarter the group put on fuel hedges, then closed them before March 31 for realized proceeds of €5.1 million. As of March 31 it had no outstanding fuel-hedge positions. It was still hedging carbon allowances. As of the date of that report, around 14.5% of 2026 carbon-allowance exposure was covered at an average €72.52.

The fleet is a single type, which concentrates both the engine problem and the lessor negotiation. On August 11 the airline said prolonged Pratt & Whitney engine-availability constraints had stopped it deploying the full fleet, and laid out a plan to shrink from 54 A220-300s to about 36 by year-end, then toward 40 by 2031. It did not publish a grounded-aircraft count. Chapter 11, it said, supplies the framework to negotiate with creditors, aircraft lessors and other stakeholders. No lessor-by-lessor exposure was disclosed.

For a holder of listed airline equity, Monday’s event is a sector story, not a line item. The U.S. Global Jets ETF CJETS, which owns global airlines and manufacturers and carries a C under etf.net’s published grading method, last closed Friday, September 11, at $28.17.

What happens next is a court calendar, not a forecast. airBaltic said it will seek customary approval of the €350 million facility in the coming days. Until that order is entered, the committed money is a commitment. Lessors and the 2029 bondholders now negotiate under a U.S. stay, with a stated aim of wrapping up around June 2027. Oil at $108 does not, by itself, tell you how that bargaining ends.