Air Baltic - Chapter 11 Case Summary

Business Description

Air Baltic Corporation AS ("Air Baltic AS"), a Latvian joint stock company based in Riga, together with debtor subsidiaries Air Baltic Training, SIA ("Air Baltic Training") and Baltijas Kravu Centrs SIA ("BKC") (collectively, the "Debtors," and together with their non-Debtor affiliates, "airBaltic" or the "Company"), is the flagship airline of Latvia and the leading air carrier in the Baltic region. The Company operates a fleet of fifty-four Airbus A220-300 aircraft serving more than seventy destinations across forty countries in Europe, the Middle East, North Africa, and the Caucasus, and carried more than 5.2 million passengers in 2025 with approximately 3,000 employees.

The Company describes its model as that of a "hybrid carrier," combining traditional network-carrier service such as business class and full-course meals with cost measures including a single aircraft-family fleet, ticketless services, and direct online sales. Beyond passenger transportation, the Debtors provide cargo aviation, charter transportation, and aircraft, crew, maintenance, and insurance ("ACMI") services.

Riga is the only sizeable hub in the Baltics and the Company's main base and transfer hub, and the Company holds an approximately 40% combined seat share across the Riga, Tallinn, and Vilnius airports. Since 2020 the airline has operated a single-type A220-300 fleet, the largest A220 fleet in Europe.

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Corporate History

Air Baltic AS was established on February 8, 1995, when the Government of Latvia, having restored independence following the collapse of the Soviet Union in 1991, created a national airline through a private joint venture agreement with Scandinavian Airlines ("SAS"). The Government of Latvia initially held 51.03% and SAS the balance. The carrier grew in the early 2000s following Latvia's entry into the European Union, but the 2008 global financial crisis hit it severely, and in January 2009 SAS sold its entire 47.20% stake to another private entity. Financial difficulties persisted until 2011, when the government of Latvia provided €120 million ($139.2 million) of support and state ownership rose to 99.9%. A subsequent "Re-shape Programme" cut staff and capacity, cancelled loss-making routes, and reduced the number of aircraft types operated, returning the business to profitability in 2013, earlier than expected.

Later strategy turned to growth and modernization. The Debtors developed a "Horizon 2021" strategy in 2015 aimed at expanding the fleet and their presence in the surrounding Baltic states, and in November 2016 became the world's launch customer for the Bombardier CS300, now the Airbus A220-300. A private investor acquired approximately 20% of Air Baltic AS in 2016, reducing Latvia's stake to approximately 80.5%. The COVID-19 pandemic stalled that growth, and successive state cash injections lifted state ownership to 97.97% by 2022. In 2025, Deutsche Lufthansa AG ("Lufthansa") completed a strategic 10% share investment alongside a co-investment by the Government of Latvia, for an aggregate equity injection of €28 million ($32.5 million).

Ownership and Governance

Air Baltic AS's shares are administered through Nasdaq CSD. Its two largest shareholders are the Latvijas Republikas Satiksmes Ministrija (the "Latvian Ministry of Transport") and Lufthansa, holding approximately 88% and 10% of the shares respectively; Air Baltic AS has also issued two mandatorily convertible shares, with each of those holders holding one unit.

• Under Air Baltic AS's shareholders' agreement, Supervisory Board members are appointed by the shareholders, and the Supervisory Board in turn appoints the Executive Board. Three of the five Supervisory Board members are currently selected by the Latvian Ministry of Transport as majority shareholder, a right that drops to a single appointment if its holdings fall below 25% of outstanding shares. Lufthansa appoints one member, and a minority shareholder holding less than two percent of outstanding shares appoints the other. As of the Petition Date the Supervisory Board consists of Andrejs Martinovs (Chairman), Jurģis Sedlenieks (Deputy Chairman), Ruta Amtmane, Dr. Alexander Feuersänger, and Lars Thuesen, and the Executive Board consists of Erno Hildén, President and Chief Executive Officer and Executive Board Chairman, and Vitolds Jakovļevs, Chief Financial Officer.
• Lars Thuesen, appointed to the Supervisory Board in April 2017, is the indirect 100% shareholder of SIA AIRCRAFT LEASING 1, which owns 2.03% of airBaltic shares, and Dr. Alexander Feuersänger serves as Senior Vice President Fleet Management at Lufthansa Group.

Corporate Structure

Air Baltic AS is the direct parent of the other Debtors and of the non-Debtor affiliates. Three of its four subsidiaries are Latvian: Air Baltic Training, which operates a training school covering the pilot academy and maintenance, flight, and cabin crew training; BKC, which handles aviation and ground cargo at Riga International Airport; and non-Debtor AS Aviation Crew Resources, which outsourced aviation crew and began liquidation before these Chapter 11 Cases. The fourth subsidiary, airBaltic Switzerland GmbH LLC ("airBaltic Switzerland"), was formed in Switzerland in 2026 to accommodate the Debtors' Swiss and other ACMI operations and, upon receipt of certain operating licenses, expects to employ managers, administrators, and approximately sixty to eighty pilots.

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Operations Overview

Route Network and Partnerships

The Debtors fly to seventy destinations in forty countries, operating from their principal hub in Riga alongside point-to-point bases in Tallinn, Estonia; Vilnius, Lithuania; and Gran Canaria, Spain, with destinations and frequencies varying by seasonal demand. The 2025 network comprised 140 routes: seventy-seven from Riga, twenty-eight from Tallinn, twenty-one from Vilnius, ten from Gran Canaria, and four from other points, including Palanga-Amsterdam and Tampere-Malaga. New 2025 services included Riga to Faro, Vilnius to Prague, and Tallinn to Barcelona, Reykjavik (Keflavik), Tirana, and Palma de Mallorca. The Debtors are the only airline in the Baltics with substantial transfer traffic through their Riga hub, a regional transfer-hub model that supports higher frequencies on trunk routes and a broad destination portfolio from Riga.

Connectivity is extended through twenty-six codeshare and thirty-two interline relationships, with key partners including Air France/KLM, Delta Airlines, British Airways, SAS, Lufthansa Group, Qatar Airways, Air Canada, United Airlines, and Etihad Airways. The codeshare network affords customers access to more than 300 destinations, and approximately 6% of total revenue is attributable to the codeshare agreements. The Debtors settle mutual payment obligations with other airlines through the IATA Clearinghouse, making cumulative net settlement payments of approximately €31.5 million ($36.5 million) for 2025.

Revenue Mechanics

Passenger operations represented approximately 76.9% of total operating revenue in 2025, generating approximately €593 million ($687.9 million) of revenue — €549 million ($636.8 million) of ticket revenue and €44 million ($51 million) of ancillary revenue from on-board sales, ticket change fees, excess baggage charges, and other services. The Debtors served approximately 5.21 million passengers in 2025, up 1% over 2024.

• The airBaltic Club loyalty program has more than 1.74 million members, who accumulate points through ticket purchases, an airBaltic-branded credit card, extra flight services, partner-airline tickets, and purchases from hotel, car rental, and travel insurance partners, and who may redeem points for tickets, business class upgrades, checked baggage e-vouchers, gift cards, and souvenirs. The First Day Declaration states that airBaltic Club members account for approximately 32% of total passenger revenue, while the Customer Programs Motion puts the figure at approximately 34% of passenger revenues.
• Travel agencies generated approximately 26% of passenger sales in 2025, and a Corporate Incentive Program covering 983 corporate clients generated approximately €27 million ($31.3 million) of revenue against approximately €1.5 million ($1.7 million) of costs in 2025. Tickets have historically been refunded at approximately 14% of sales, and approximately €1.7 million ($1.9 million) of gift cards remain outstanding.
• ACMI-out leasing, under which the Debtors lease aircraft together with crew, maintenance support, and insurance to other airlines, has grown from approximately €77 million ($89.3 million) in 2022 (15% of total operating revenue) to approximately €157 million ($182.1 million) in 2025 (20.3%). Through 2025 the Debtors deployed on average 14.1 aircraft under ACMI arrangements for airline partners within major European airline groups.
• The remaining approximately 3% of revenue comes from charter services, cargo and mail transportation, and other commercial activities. Cargo revenue was approximately €6.2 million ($7.2 million) in 2025, generated chiefly through underbelly cargo and mail on scheduled flights and cargo handling at Riga International Airport; BKC has operated there since 2001 and is the airport's largest cargo handler by turnover and flights handled; operations at the airport's new cargo handling terminal commenced at the beginning of 2025, and BKC handled approximately 10,379 tons of cargo and mail that year. Charter services run primarily to tour operators, as well as aviation brokers, the military, corporate clients, and athletic teams; as of the Petition Date the Debtors had sold approximately €11.9 million ($13.8 million) of charter reservations for flights to be operated postpetition.

Fleet

The Debtors operate a single-type fleet of fifty-four Airbus A220-300 aircraft, which maximizes scheduling, maintenance, and operating efficiencies and supports reliability, training, crew-management, and network-planning efficiencies. None of the aircraft is owned outright: the entire operating fleet is leased from third-party lessors except for eight aircraft financed under finance leases. Since 2012 the Debtors have entered into a series of purchase arrangements with Bombardier Inc. and Airbus Canada for A220-300s, historically financing many acquisitions through competitive, oversubscribed sale-and-leaseback tender processes. The aircraft and engine fleet has mainly been acquired through agreements with Airbus Canada Limited Partnership ("Airbus") and RTX Corporation, Pratt & Whitney Division ("Pratt & Whitney"), the sole manufacturers of the aircraft and engines respectively that power the fleet, and future orders are for A220-300s only.

Workforce

Approximately 93% of the Company's roughly 3,000 employees are located in Latvia, with 198 employees, approximately 7% of the total, in Estonia and Lithuania. Approximately 10% of employees belong to four trade unions — the Latvian Civil Aviation Pilots Union, Latvian Aviation Trade Union Federation, Latvian Aviation Workers' Union, and the Latvian Aviation Union — and the Debtors are party to two collective bargaining agreements obligating them to provide certain employee benefits, compensation, and working conditions. There has been no work stoppage initiated by employees since operations commenced. Professional development runs through the Pilot Academy, Technical Academy, and Leadership Academy; since its inaugural 2018 class, 164 Pilot Academy graduates have gone on to serve as airBaltic pilots, and half of airBaltic first officers graduated from the academy. The first cohort of fifty-seven managers graduated from the Leadership Academy in 2025.

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Prepetition Obligations

As of the Petition Date the Debtors carried outstanding funded debt of approximately €503.3 million ($583.9 million) and outstanding operating lease obligations of approximately €855.6 million ($992.5 million), excluding the finance leases. On a consolidated basis, as of June 30, 2026, the total value of the Debtors' assets is approximately $1.8 billion against liabilities of approximately $2 billion.

Prepetition Funded Debt	Approx. Outstanding (EUR)	Approx. Outstanding (USD)
2029 Senior Secured Bonds	€398.2 million	$462 million
BluOr Bank Secured Facility	€7.9 million	$9.2 million
Finance Leases	€78.6 million	$91.2 million
Total Secured Debt	€484.7 million	$562.3 million
Government Loan	€18.6 million	$21.6 million
Total Funded Debt	€503.3 million	$583.9 million

2029 Senior Secured Bonds

On May 14, 2024, Air Baltic AS issued €340 million ($394.4 million) in aggregate principal amount of 14.500% senior secured bonds maturing August 14, 2029 (the "2029 Bonds"), followed in October 2024 by a €40 million ($46.4 million) tap issuance that brought the total to €380 million ($440.8 million). The 2029 Bonds are admitted to the Euronext Dublin Official List and trade on Euronext Dublin's regulated market, with U.S. Bank Trustees Limited as trustee, and are secured by a first ranking Latvian law governed commercial pledge over a substantial number of the Debtors' assets, subject to certain exceptions.

• On August 17, 2026, the bondholders (the "Bondholders") approved resolutions converting the August 14, 2026 and November 14, 2026 cash coupon payments to payment-in-kind and waiving certain minimum liquidity covenants. As of the Petition Date, approximately €393.8 million ($456.8 million) in aggregate principal amount of 2029 Bonds is outstanding, plus approximately €4.4 million ($5.1 million) of accrued and unpaid interest. The Debtors' funded-debt table carries the 2029 Bonds at approximately €398.2 million ($462 million).

BluOr Bank Secured Facility

In August 2025, BluOr Bank issued a €10 million ($11.6 million) five-year secured facility to refinance construction of the Debtors' cargo hangar facility at Riga International Airport. The loan bears interest at six-month EURIBOR plus a fixed margin of 5.5%, is repayable over five years in monthly installments, and matures in July 2030. It is secured by the land use rights for the hangar's construction and by the hangar itself. Approximately €7.9 million ($9.2 million) is outstanding.

Finance Leases

The Debtors' fleet includes eight aircraft, seven spare engines, and a flight simulator under finance lease agreements (the "Finance Leases"), which require monthly, quarterly, or semi-annual lease payments together with maintenance, servicing, and insurance obligations and specified return conditions. Under the Finance Leases the Debtors have the right to acquire title to the aircraft at the end of the lease term upon payment of a nominal purchase price.

• Seven of the finance-leased aircraft are A220-300s owned by Lidmasinas Leasing Limited, leased to Axiom Baltic Services Ltd. and subleased to the Debtors (the "Axiom Aircraft").
• The remaining finance-leased aircraft (the "JALL Aircraft") and the seven spare engines (the "JALL Engines," and together with the Axiom Aircraft and JALL Aircraft, the "Financed Equipment") are owned by Jet Aircraft Leasing Limited and leased directly to the Debtors.
• All of the Financed Equipment is subject to first priority mortgages in favor of Export Development Canada. Contractual terms vary, with loan terms ranging from seven to twelve years. The Debtors also maintain one Airbus 220 full-flight simulator for their pilot training program.

The principal amount outstanding under the Finance Leases is approximately €78.3 million ($90.8 million), while the funded-debt table states approximately €78.6 million ($91.2 million).

Government Loan

In April 2026 the Latvian Parliament approved a short-term €30 million ($34.8 million) subordinated emergency loan maturing August 31, 2026, granted without collateral at market-based interest rates. As of July 2026 the Debtors had repaid approximately €12.9 million ($15 million) of principal and interest, leaving approximately €18.6 million ($21.6 million) outstanding as of the Petition Date including accrued interest. The Republic of Latvia is listed as the third-largest unsecured creditor on account of the loan at $20.1 million.

Operating Leases

The Debtors operate forty-six aircraft and seven engines under operating leases requiring monthly lease payments plus maintenance, servicing, and insurance obligations. The aircraft operating leases have initial terms of approximately twelve years, ownership remains with the lessor, and the aircraft are returned at the end of the term without the Debtors taking legal ownership. Approximately €855.6 million ($992.5 million) of total recognized long-term liabilities under the operating leases remained outstanding as of the Petition Date.

Order Book and OEM Commitments

The Debtors' agreements with Airbus govern the purchase of A220-300 aircraft, with forty firm orders outstanding carrying a contracted future purchase commitment in excess of €3 billion ($3.5 billion) at list price. The Debtors have agreed with Airbus to defer additional deliveries beyond 2026 to align fleet growth with available funding. Under the PW1500G Engine Purchase, and Support, and Fleet Management Program Agreement with Pratt & Whitney, the Debtors carry a contracted future commitment of approximately €92 million ($106.7 million) for additional engines.

Unsecured Claims

Pratt & Whitney is the single largest unsecured creditor, at $66.5 million on account of maintenance and service provider claims, and provides the only engines certified for the A220-300 fleet; it could exercise possessory rights over the Debtors' engines. The second-largest unsecured claim, held by the Latvian Environment, Geology and Meteorology Centre at $42.4 million on account of EU Emissions Trading System ("EU ETS") scheme payments, is marked contingent, and Shell Energy Europe B.V. holds a further $5.4 million of EU ETS allowance claims. The Debtors' EU ETS surrender obligation is approximately $49.2 million, and failure to timely satisfy it could result in monetary penalties and revocation by EU member states of the Debtors' operating licenses. Other large unsecured claims include the State Revenue Service of the Republic of Latvia at $15.4 million for employment-related tax payable, Starptautiska Lidosta "Riga" VAS at $9.1 million, and Eurocontrol at $5.6 million.

As of the Petition Date the Debtors estimate outstanding obligations of approximately €45 million ($52 million) to non-U.S. vendors, of which approximately €25 million ($29.2 million) comes due within the interim period; approximately €87 million ($101.7 million) to outside maintenance and service providers, of which approximately €13.5 million ($15.7 million) comes due in the interim period; approximately €250,000 ($291,000) to contractors, of which approximately €140,000 ($163,000) comes due in the interim period; and approximately €40 million ($46.6 million) of 503(b)(9) claims, of which approximately €23 million ($27 million) comes due in the interim period.

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Events Leading to Bankruptcy

The First Day Declaration attributes the Company's strained liquidity to a confluence of macroeconomic and microeconomic factors compounding over the past six years, layered on legacy obligations from a pre-pandemic growth plan. In 2019 the Debtors issued an inaugural €200 million ($232 million) bond maturing in 2024 to support a growth plan built on a single-type A220-300 fleet; the 2029 Bonds were issued in 2024 in part to refinance those bonds, which combined with the pressures that followed produced the Company's present leverage.

Pandemic and Geopolitical Disruption

The COVID-19 pandemic devastated global air travel from 2020 and forced the Company to operate at a fraction of pre-pandemic capacity. In the first half of 2020 alone revenue fell 62% year-over-year to €82.5 million ($95.7 million), passengers fell 64% to 0.8 million, and the Debtors reported a net loss of €184.8 million ($214.4 million). From 2020 to 2022 the Company incurred approximately €455 million ($527.8 million) in losses largely attributable to the pandemic. The government of Latvia provided €250 million ($290 million) of emergency equity support in July 2020 under European Commission-approved state aid rules, followed by a further €90 million ($104.4 million) recapitalization approved across 2021 and 2022, lifting state ownership to approximately 97.97%. Traffic and pricing have since recovered, with passengers carried on the Debtors' own network growing to 1.04 million in the first quarter of 2026 from 0.93 million in the first quarter of 2024 and first-quarter 2026 yield surpassing its first-quarter 2024 level for the first time, but the Company needed substantial state aid and new funded debt to survive the pandemic.

In early 2022 Russia invaded Ukraine and the Debtors permanently suspended all routes to Russia, Belarus, and Ukraine, markets that had historically been significant sources of revenue and transfer traffic through the Riga hub. The Debtors saw an estimated €40 million ($46.4 million) reduction in 2022 passenger revenue from suspending the Russia and Ukraine flights, which had been among the Company's most profitable routes, and routes that formerly overflew Russian, Belarusian, or Ukrainian airspace required longer routings that increased fuel and other operating costs. The closure of the Eastern markets also weighed on economic growth in the Baltic states and, indirectly, on demand for air travel.

Engine Shortages

Beginning in 2022 the Debtors experienced unprecedented fleet-availability disruptions from a shortage of spare Pratt & Whitney PW1500G engines. In July 2023 Pratt & Whitney announced that the engines suffer from a rare condition in the powdered metal used to manufacture certain engine parts. Because the PW1500G is the only engine certified for the A220-300, the Debtors have no ability to substitute an alternative engine. During the 2024 and 2025 summer seasons they had an average of 8.0 and 7.7 aircraft on the ground respectively, and quarterly average aircraft-on-ground counts reached as high as thirteen. The shortages led to the cancellation of a significant number of flights and required sourcing costly ACMI services from other operators; those cancellations, additional wet leases, service suspensions, and frequency reductions limited new route development at the Riga hub and reduced operating profit margins, and the Debtors missed opportunities to expand operations and revenue as they prioritized schedule stability on strategic core services.

The forty firm A220-300 orders with Airbus and the approximately €92 million ($106.7 million) of undelivered Pratt & Whitney engines were placed in support of a growth plan the Debtors can no longer fund, and the Debtors' revised business plan contemplates the cancellation or indefinite deferral of those deliveries.

The 2026 Fuel Shock

The sharp and unanticipated increase in jet fuel prices in 2026, following the beginning of the Iran-U.S. conflict, precipitated the liquidity crisis giving rise to these Chapter 11 Cases. Fuel is among the Debtors' largest operating costs, historically representing approximately 20-27% of total operating expenses. airBaltic entered 2026 assuming a jet fuel price of approximately $685 per ton; immediately following the outbreak of the conflict prices peaked at almost three times that level, at approximately $2,000 per ton. Jet fuel prices rose approximately 109% at their peak from their January 2026 levels, and the actual average price during the first eight months of 2026 was $1,168 per ton, a $454 increase over the same period in 2025. Based on expected consumption of 165 thousand tons for April through December 2026, every $100 increase per ton raised costs by approximately $16.5 million. The Company, 90% unhedged, bore almost the full brunt of the spike, and in March 2026 sold all remaining fuel hedges to generate approximately €5.7 million ($6.6 million) of emergency liquidity and avoid defaulting on the Minimum Liquidity Requirement covenant under the 2029 Bonds, leaving it fully exposed to spot prices for 100% of April-December 2026 fuel needs. Because many competitors had hedged a significant part of their fuel exposure, the Debtors could not pass the increased costs through to customers in any meaningful respect. The Company was also forced to temporarily cease services to Tel Aviv and Dubai; Dubai services have not resumed.

The market reaction was severe. The 2029 Bonds were quoted in the mid-93s in late January 2026 but by August 2026 were quoted in the 20s, effectively foreclosing any realistic prospect of refinancing or extending the funded debt out of court.

Capital-Raising Efforts and the Aborted IPO

As a condition of the pandemic-era state aid, the government of Latvia committed to an exit strategy centered on an eventual airBaltic IPO, through which it would decrease its enlarged stake without reducing its shareholding below its pre-COVID-19 level of approximately 80.05%. The First Day Declaration separately states that Latvia's stake was reduced to approximately 80.5% following a private investor's 2016 acquisition. The 2029 Bond proceeds were used to repay the €200 million ($232 million) 2019 Eurobond and a €36.1 million ($41.9 million) loan from the government of Latvia, and to support ongoing operations and capital expenditures.

In 2024 and 2025 the Debtors entered a strategic partnership with Lufthansa Group. Lufthansa agreed to acquire a convertible instrument representing approximately 10% of the Debtors' equity for €14 million ($16.2 million), to be converted into ordinary shares based on the eventual IPO valuation with potential dilution to a floor of 5%, and to receive a seat on the Supervisory Board. The parties had hoped a strategic equity relationship could help secure funding for the growth plans while strengthening the balance sheet ahead of a public offering. The Debtors then worked toward a comprehensive capital solution across five tracks: outreach to lessors on fleet financing and security deposit terms; raising new equity capital, principally through a planned IPO; addressing maintenance capital expenditures, including the Pratt & Whitney engine availability issues; managing funded debt and leverage; and working with the government of Latvia as majority shareholder and lender.

The contemplated offering — an IPO of ordinary shares to be listed on Nasdaq Riga (Baltic Main List) and the Frankfurt Stock Exchange (Prime Standard) — targeted an estimated €250 million ($290 million) primary capital raise, later referenced at up to approximately €264-300 million ($306-348 million). The Debtors were forced to shift the IPO timeline repeatedly as European airline share prices declined and their own financial performance made it difficult to support the valuations needed, and they shifted away from relying solely on the IPO toward interim, non-IPO sources of capital to bridge to an eventual offering.

The Business Plan and the Search for Interim Financing

In the spring of 2026, as the financial position continued to deteriorate, the Debtors sought further assistance from the government of Latvia, which extended the short-term €30 million ($34.8 million) loan on commercial terms following an ex ante assessment of the Debtors' financial situation and of the pricing and tenor of the facility. Using the liquidity and time that loan afforded, the Debtors retained Seabury Securities LLC and Milbank LLP to evaluate strategic alternatives and formulated a new business plan (the "Business Plan") targeting a fleet reduction to thirty-six aircraft by the end of 2026 and approximately forty aircraft by 2031, approximately €45 million ($52.2 million) of annual operating cost savings from cost optimization initiatives, and a profitability-focused network strategy centered on Riga. The Business Plan also contemplates returning approximately twenty surplus aircraft, obtaining reduced lease rates, and obtaining concessions from key contract counterparties. Executing it required both a significant liquidity infusion and a recapitalization of the balance sheet, and consent from lessors, Bondholders, and other contractual counterparties that the Debtors recognized would not be practicable to procure before late 2026 at the earliest.

In the summer of 2026 the Debtors launched a solicitation process for interim financing, engaging prospective lenders, an ad hoc group of 2029 Bondholders (the "Ad Hoc Group"), and several institutions experienced in distressed financing. They received term sheets from four prospective providers, including the Ad Hoc Group. Negotiations with third-party providers stalled because a significant portion of the Debtors' assets are already encumbered in favor of the 2029 Bondholders and no party was willing to lend on less than a super-senior basis, which required Bondholder consent; the path to sufficient Bondholder consent without the Ad Hoc Group's support was extremely challenging, and the Debtors identified the Ad Hoc Group as the most viable funding source.

• The Debtors initially proposed a comprehensive restructuring framework comprising €225 million ($261 million) of new interim financing secured on a first-out basis by the existing bond collateral package, €225 million ($261 million) of new long-term debt, and €100 million ($116 million) of fresh equity. The proposal contemplated a partial equitization of the 2029 Bonds, with bondholders receiving aggregate take-back debt consideration of up to €125 million ($145 million), as well as equitization of additional financial, lease, and other balance sheet obligations.
• To preserve liquidity and establish a framework permitting the proposed financing and recapitalization to proceed, the Debtors solicited consents from 2029 Bondholders to convert the August 14 and November 14, 2026 cash interest payments to payment-in-kind and to suspend the €25 million ($29 million) minimum liquidity covenant. The noteholders accepted both amendments at an August 17, 2026 meeting, and the Debtors, the bond trustee, and the security trustee thereafter executed a second supplemental trust deed implementing them.

Negotiations on the Ad Hoc Group proposal were protracted, and as jet fuel prices increased again in late summer following the renewed conflict in Iran it became evident that the proposal likely would not provide sufficient liquidity to support the comprehensive liability process the Debtors required. The Debtors therefore solicited bids for approximately €350 million ($406 million) of DIP financing, receiving multiple proposals beginning in late August 2026 and negotiating with potential lenders for approximately two weeks. Absent a binding commitment and facing an imminent liquidity cliff, on September 4, 2026 airBaltic called a bondholder meeting and solicited consents on the Ad Hoc Group proposal to maintain the viability of what was then the only committed proposal in hand that could prevent a liquidation. Several more days of negotiations followed, and on September 12, 2026 the Debtors signed a commitment letter with the DIP Lenders.

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Chapter 11 Filing

The Debtors filed Chapter 11 petitions in the United States Bankruptcy Court for the Southern District of New York on September 14, 2026, seeking joint administration. The stated objectives are to obtain access to debtor-in-possession financing, return surplus aircraft and reprofile the remaining lease obligations, and address outstanding obligations in an orderly fashion while preserving the core route network and employee base. Key goals include reaching consensual agreements with lessors and OEMs to reprofile burdensome contractual arrangements and obtaining commitments for exit debt and equity financing. Milbank LLP is proposed counsel; Seabury Securities LLC was retained prepetition to assist in evaluating strategic alternatives; and Epiq Corporate Restructuring, LLC is the proposed claims and noticing agent.

The DIP Facility

Following a competitive marketing process with multiple active bidders, including the Ad Hoc Group's interim financing proposal, the Debtors selected a DIP facility (the "DIP Facility") provided by Barclays, Hayfin Capital Management, Morgan Stanley, Oaktree Capital, and Strategic Value Partners, LLC (collectively, the "DIP Lenders").

• Size: €350 million ($406 million) of committed new money, in the form of a superpriority, senior-secured term loan facility.
• Availability: €175 million ($203 million) upon entry of the interim DIP order, with the remaining €175 million ($203 million) in two separate tranches upon entry of the final order and subject to the conditions set forth in the DIP documents.
• Use of proceeds: funding day-to-day operations, including employee, key vendor, and contract counterparty payments necessary to continue flights, and exercising the purchase option under the Finance Leases and repaying the existing debt for the Financed Equipment, which would transfer title to the Finance Lease collateral to the estates.

The Debtors' 30-day postpetition estimates, inclusive of DIP proceeds and the Finance Lease payoff, show $258 million of cash receipts against $242 million of disbursements for a net cash gain of $16 million, with $10 million of unpaid obligations and $8 million of uncollected receivables. Estimated payments over that period comprise approximately €9.4 million ($10.9 million) to employees and €26,000 ($30,160) to non-employee officers, directors, and equityholders, with no payments to financial and business consultants.

First-Day Relief

The operational first-day motions are directed at uninterrupted service. The Debtors seek authority to continue the existing cash management system, thirty bank accounts, and business forms, to engage in intercompany transactions with administrative expense status for the resulting intercompany claims, and a waiver of the section 345 investment and deposit requirements given that only one account sits at an authorized depository. They also seek to assume the Critical Airline Agreements — the IATA agreements, approximately thirty-two bilateral interline and electronic ticketing agreements, twenty-six codeshare agreements, frequent flyer program agreements, reprotection and lounge access agreements, ACMI agreements, and industry-standard fare publication, booking, and settlement agreements — to honor prepetition obligations thereunder, and to enter into new ones, with the automatic stay modified accordingly.

• Customer Programs — Authority to maintain the airBaltic Club frequent flyer program, tickets and refunds, gift cards, promotions and voucher programs, and the Corporate Incentive Program, and to honor prepetition customer obligations, with the automatic stay modified to permit ordinary course setoffs. The Debtors also maintain relationships with travel agencies and rely on credit card arrangements essential to their sales operations. Absent that relief, clearinghouses, travel agencies, and cargo sales agencies may decline to process setoffs unprocessed as of the Petition Date and may establish self-help reserves or withhold postpetition remittances.
• Foreign Vendors and Lien Claimants — Authority to pay prepetition obligations of non-U.S. vendors, lien claimants holding perfected or potential mechanics', materialmen's, or similar liens, and 503(b)(9) claimants, to continue performing under related agreements, and to permit certain non-U.S. vendors and lien claimants, subject to the Debtors' prior written permission, to exercise setoff and recoupment rights against prepetition credits or prepayments. Many of these parties have little or no connection to the United States and may be unaware of the automatic stay or consider themselves beyond the Court's jurisdiction.
• Insurance — Authority to continue the approximately 18 insurance policies, renew, supplement, modify, or purchase coverage, satisfy related obligations including brokerage compensation embedded in premiums and any separate brokerage fees, and enter into new premium financing agreements.
• Taxes — Authority to continue paying all taxes and fees in the ordinary course, including amounts accrued but unpaid as of the Petition Date. Nonpayment could also let the State Revenue Service register priority tax liens without a court order, freeze and sweep bank accounts, refer collection to a bailiff, offset state amounts owed including VAT refunds, and file a creditor's insolvency application, triggering events of default under the Debtors' financing agreements, leases, and bond documentation, and could expose directors and officers to uncapped, joint and several personal liability under Section 60 of the Latvian Law on Taxes and Fees that survives the company's insolvency.
• Wages — Authority to maintain the employee programs in the ordinary course and pay prepetition employee obligations, covering compensation, payroll processing fees, incentive plans, paid leave, workers' compensation, employee benefits, reimbursable business expenses, employee deductions, payroll taxes, union dues deductions, and severance, across the approximately 3,000 employees. The Debtors also rely on approximately 35 outsourced companies and independent contractors. Failure to honor prepetition employee obligations could draw wrongful termination lawsuits, insolvency proceedings in local jurisdictions, and personal liability for certain senior managers.

Key Dates

• February 8, 1995 – Air Baltic AS established through a joint venture between the Government of Latvia and SAS.
• January 2009 – SAS sells its entire 47.20% stake.
• 2011 – Latvia provides €120 million ($139.2 million) of support, lifting state ownership to 99.9%.
• November 2016 – Debtors become launch customer for the Bombardier CS300 (now A220-300).
• July 2020 – €250 million ($290 million) state cash injection.
• July 2023 – Pratt & Whitney announces the PW1500G powdered metal condition.
• May 14, 2024 – €340 million ($394.4 million) of 14.500% 2029 Bonds issued.
• October 2024 – €40 million ($46.4 million) tap issuance of 2029 Bonds.
• August 2025 – BluOr Bank €10 million ($11.6 million) secured hangar facility.
• March 2026 – Remaining fuel hedges sold for approximately €5.7 million ($6.6 million).
• April 2026 – Latvian Parliament approves €30 million ($34.8 million) emergency loan.
• August 17, 2026 – Bondholders approve PIK conversion and minimum liquidity covenant suspension.
• August 31, 2026 – Government loan maturity.
• September 4, 2026 – Bondholder meeting called to solicit consents on the Ad Hoc Group proposal.
• September 12, 2026 – Commitment letter signed with the DIP Lenders.
• September 14, 2026 – Petition Date.