Aviation crisis deepens as Latvia’s airBaltic files for bankruptcy protection

Latvia’s national carrier airBaltic has voluntarily filed for protection under Chapter 11 of the US Bankruptcy Code in New York as part of a restructuring aimed at reducing its debt, the airline said, Reuters reports.

The move comes as the conflict involving Iran has sent jet fuel prices sharply higher, putting additional pressure on an already strained global aviation sector.

airBaltic said it had secured a commitment for €350 million ($405 million) in financing from lenders including Strategic Value Partners, Barclays, Hayfin Capital Management, Morgan Stanley and Oaktree Capital Management. The funds will support the airline’s operations throughout the restructuring process.

The US war with Iran has caused jet fuel prices to double, triggering the most severe crisis in the air travel industry since the COVID-19 pandemic. Investors and airline executives have warned that carriers with weak balance sheets and greater exposure to oil-price volatility are likely to be hit hardest by the conflict.

Majority-owned by the Latvian government, airBaltic said the Chapter 11 filing would provide protection from creditors while it negotiates a restructuring of its debt. The airline stressed that flights would continue to operate as scheduled throughout the court-supervised process.

The carrier’s financial position had already been under pressure, prompting the Latvian government to provide a €30 million loan in April. Rising fuel costs have further weakened airBaltic’s liquidity in recent months.

airBaltic is now the second airline casualty linked to the conflict, following the collapse of US discount carrier Spirit Airlines in May after it failed to secure creditor support for a US government-backed bailout plan.

Other airlines like AirAsia (AIRG.KL), opens new tab, Southeast Asia's largest budget carrier, are seeking fresh capital amid mounting ⁠financial pressure due to rising jet fuel costs and heavy foreign exchange losses.

By Vafa Guliyeva