Latvia's national carrier airBaltic voluntarily filed for protection under Chapter 11 of the U.S. Bankruptcy Code in New York, it announced on Monday, saying it was looking to restructure its debt pile and survive a deepening sector crisis brought on by the U.S.-Iran war.
AirBaltic said in a statement it had secured a commitment for 350 million euros ($405 million) in financing from lenders including Strategic Value Partners, Barclays, Hayfin Capital Management, Morgan Stanley and Oaktree Capital Management to support its operations during the restructuring.
The funding, at an interest rate of about 12%, is subject to approval by the court, AirBaltic CEO Erno Hilden told a press conference.
"In the coming months, we will engage with all our stakeholders to agree on sustainable terms," he said, adding that the company is looking at 44 million-euros profit improvement annually.
AirBaltic will use its bankruptcy to cancel or defer outstanding deliveries on a $3.5 billion order for 40 additional planes from Airbus and $106.7 million worth of additional aircraft engines from Pratt & Whitney, a court filing showed.
It said it had already engaged with the planemaker to defer additional deliveries after this year.
Pratt & Whitney owner RTX declined to comment. Airbus did not immediately reply to a request for comment.
AirBaltic said flights would operate as scheduled during the court-supervised process, which it expects to finish by June next year.
The U.S. war with Iran has caused jet fuel prices to double, sparking the air travel sector's worst crisis since the COVID-19 pandemic. Investors and executives have warned that carriers with stretched balance sheets risked collapse.
"AirBaltic has been experiencing acute financial stress due to a combination of financial and geopolitical factors," the airline's board wrote in a filing with the bankruptcy court.
AirBaltic has about $583 million in funded debt and finance lease liabilities, and it owes some 106 million euros in payroll taxes and airline taxes and fees, it wrote in the filing.
Its 2025 revenue was around 779 million euros.
In an interview with Reuters, Hilden said AirBaltic was in talks with labor unions about "an adjustment in the workforce," which he said would be a natural conclusion to the existing capacity reduction plans.
The carrier has been growing its global workforce for a decade and now employs more than 3,000 people.
"I do think that the underlying business for AirBaltic is a very healthy one. So after we really execute on our new business plan, I do see a bright future for the company," he said.
Hilden said that the biggest changes in terms of the company's operations during the Chapter 11 restructuring would involve the downsizing of its wet lease business, which loans out planes and crews to other airlines for a fee.
AirBaltic, which has a fleet of some 50 Airbus A220-300 planes, is majority-owned by the Latvian government, with Germany's Lufthansa holding a 10% minority stake.
Before the filing, AirBaltic's bondholders had been due to vote on the company's plan to raise up to 257 million euros through new super-senior debt due in February 2027, at a rate of 25%.
Latvian Prime Minister Andris Kulbergs said the Chapter 11 proceedings were initiated after bondholders with over 70% of the value of the debt decided to opt for liquidation instead.
"I view this solution as one of the best options for ensuring AirBaltic's viability, as it provides the necessary tools and time to implement the restructuring plan," Kulbergs said in a statement.
The government is continuing to look for a strategic investor as AirBaltic reduces its fleet and reorganizes obligations, he added.
AirBaltic is the second airline casualty linked to the Iran war after Spirit Airlines collapsed in May.
The U.S. discount carrier, which filed for bankruptcy months before the conflict began in late February, had failed to secure creditor support for a government bailout plan.
Other airlines like AirAsia, Southeast Asia's largest budget carrier, are seeking fresh capital.
Hilden, who led Scandinavian airline SAS through its Chapter 11 proceedings from 2022 to 2024, said AirBaltic is "targeting (the) same process."
"This gives them a protective framework to put their house in order ... I don't see why AirBaltic wouldn't do the same as SAS," said John Strickland, an analyst.
Yves Schwyter, founder of aviation capital risk intelligence firm Vectus Intelligence, said the Chapter 11 route was a "probably more sustainable capital structure than what was on the table a week ago."
The airline had aimed to grow its fleet to 100 planes, and, according to aviation analyst Simonas Bartkus, was expecting to develop transit traffic from Russia, Belarus and Ukraine through Riga.
"This is no longer available, and the company became too large for its market ... The rise in fuel costs made the situation acute, they had no time to find a solution," he said.
Prime Minister Kulbergs said in a video on X that by April, AirBaltic had "burned through" 380 million euros raised via bonds issued in 2024.
A 30-million-euro emergency government loan ran out in June, he added, and the airline had tried to lease out its excess aircraft.
"Serving Baltic and Latvian routes requires only 30 aircraft, not 100," he said.
