AirBaltic Files For Chapter 11 In New York To Restructure Debt

Latvia's national airline, airBaltic, has voluntarily filed for Chapter 11 bankruptcy protection in New York to restructure its debt after soaring jet fuel prices severely squeezed its liquidity, according to a Reuters report. The filing marks the second major airline collapse linked to the conflict with Iran, following Spirit Airlines' bankruptcy in May.

"In the coming months we will engage with all our stakeholders to agree on sustainable terms," said airBaltic CEO Erno Hilden, adding that the company is looking at €44 million profit improvement annually.

Financing and Debt Restructuring Mechanics

To maintain operations during the court-supervised reorganization, airBaltic secured a commitment for €350 million in debtor-in-possession (DIP) financing. According to a U.S. News & World Report article, the rescue financing carries an interest rate of about 12% and is backed by a group of lenders including Strategic Value Partners, Barclays, Hayfin Capital Management, Morgan Stanley, and Oaktree Capital Management.

Debtor-in-possession financing is specialized credit given to companies facing bankruptcy. It allows a business to continue normal operations while court proceedings unfold, ranking senior to existing debts to give lenders higher priority in repayment.

Financial Position and Tax Liabilities

The airline entered the New York proceedings carrying approximately $583 million in funded debt and finance lease liabilities. Financial records cited by RTÉ show the carrier also owes €106 million in payroll taxes and airline taxes and fees, while recording roughly €779 million in total revenue for fiscal 2025.

According to Latvian Prime Minister Andris Kulbergs, the Chapter 11 filing became necessary after bondholders holding over 70% of the company's debt value moved toward liquidation. By utilizing the U.S. bankruptcy framework, the carrier aims to halt creditor actions and negotiate a court-approved restructuring plan.

What Is at Stake for European Regional Aviation

AirBaltic serves as a critical connecting carrier across the Baltic states, providing vital passenger and cargo routes for Latvia, Estonia, and Lithuania. The unfolding restructuring highlights the vulnerability of mid-sized European carriers to macroeconomic shocks, particularly sharp spikes in fuel expenses driven by Middle Eastern geopolitical conflicts.