airBaltic Chapter 11 reveals the scale of the crisis: collateral, jobs and 20 years of government decisions

airBaltic has not been placed in a US defence programme. On 14 September 2026, Latvia’s national airline voluntarily commenced Chapter 11 reorganisation proceedings in the US Bankruptcy Court for the Southern District of New York. The filing provides court-supervised protection against most individual debt-enforcement actions, but it does not erase debts, liens or the rights of aircraft lessors.

The combined developments reveal a crisis far deeper than another discussion about airBaltic financing. Prime Minister Andris Kulbergs claims that most bondholders who had purchased the securities at approximately 70% of their nominal value were relying on the airline’s liquidation and the recovery of collateral. At the same time, he has instructed the Ministry of Transport to declassify government decisions concerning airBaltic from the past 20 years.

The next major signal is an operational contraction. airBaltic has confirmed consultations with trade unions about workforce adjustments, plans to reduce its fleet from 54 to 36 aircraft and expects the largest changes in its ACMI or wet-lease business.

What does the US court shield actually mean?

A Chapter 11 filing generally activates an automatic stay. While it remains in force, creditors cannot freely continue most collection proceedings or enforce collateral individually outside the court-supervised process.

This gives airBaltic time to continue flying, review debts and contracts, obtain financing and prepare a reorganisation plan. Tickets remain valid, and the company says flights and passenger services will continue as usual.

However, it would be inaccurate to say that investors or creditors can no longer recover any airBaltic assets. Chapter 11 does not eliminate liens, and the court may modify the scope of the stay in certain circumstances. Section 1110 of the US Bankruptcy Code also provides a special regime for financiers and lessors in qualifying aviation transactions, including a 60-day mechanism for aircraft, engines and certain other aviation equipment. Whether that provision applies to a particular airBaltic asset or contract depends on the transaction structure and statutory eligibility requirements; the publicly available information does not justify treating it as automatically applicable to the entire fleet.

The prime minister’s description of Chapter 11 as a “protective shield” is therefore an understandable political shorthand, but it is not unlimited or permanent immunity from creditors.

Why is the prime minister’s statement about creditors politically explosive?

The prime minister has publicly stated that earlier negotiations with bondholders failed to progress because most creditors who had acquired the bonds at around 70% of nominal value were relying on liquidation and the recovery of pledged assets.

This is the prime minister’s assertion, not a finding by the US court regarding the intentions of individual investors. If the assessment is well founded, however, it suggests that some creditors may have viewed asset enforcement as financially more attractive than the airline’s continued operation.

Kulbergs has also said that he rejected the previously discussed financing of up to EUR 257 million at an annual interest rate of 25%, arguing that it would provide cash for only a few months without resolving legacy debt and lease obligations.

The prime minister has simultaneously ordered the Ministry of Transport to declassify government decisions concerning airBaltic over the past 20 years. If the documents are released in sufficiently complete form, the public may for the first time be able to assess not only the current crisis but also the chain of political decisions that led to it.

What does airBaltic receive in return for EUR 350 million in new financing?

airBaltic has announced a commitment for EUR 350 million in debtor-in-possession, or DIP, financing. Strategic Value Partners is acting as the arranger, with Barclays, Hayfin Capital Management, Morgan Stanley and Oaktree Capital Management named as additional lenders.

The financing carries an interest rate of approximately 12% a year and requires approval from the US court. It is considerably cheaper than the previously discussed 25% financing, but 12% is still a high cost of capital reflecting airBaltic’s level of risk.

DIP financing provides liquidity to maintain flights and implement the reorganisation. It does not prove that the problems have already been solved. The court must still approve the financing terms, while airBaltic must reach agreements with creditors and establish a viable capital structure by its targeted completion date of June 2027.

The fleet will shrink while the future of multibillion-dollar orders becomes uncertain

airBaltic currently operates 54 Airbus A220-300 aircraft but plans to reduce the fleet to 36 by the end of 2026. This would remove approximately one third of the current fleet from its operating model.

Reuters, citing court filings, reports that airBaltic intends to use Chapter 11 to cancel or defer deliveries of another 40 aircraft under an order valued at approximately USD 3.5 billion, as well as USD 106.7 million in additional engines from Pratt & Whitney. These are planned restructuring measures and do not mean that all the relevant contracts have already been terminated.

A smaller fleet reduces both revenue-generating capacity and the need for crews, technical staff, spare parts and related services. This is therefore not merely a balance-sheet adjustment.

Why are the largest changes expected in the ACMI business?

airBaltic CEO Erno Hildén has confirmed to Reuters that the largest changes are expected in the ACMI or wet-lease business, under which the airline provides other carriers with aircraft, crew, maintenance and insurance.

Reducing this business requires the company to adjust not only the number of aircraft but also the workload of pilots, cabin crew, technical personnel and operational employees. This explains why a financial reorganisation is already becoming a workforce restructuring.

Has airBaltic already decided on mass redundancies?

No. Hildén confirmed consultations with trade unions on workforce adjustments and said that lower capacity would naturally result in workforce changes. The exact number of affected employees has not yet been determined.

Dace Kavasa, chair of the Latvian Aviation Trade Union, told Reuters that collective dismissal consultations were underway. Alternative solutions, including part-time employment for some workers, are also being discussed, but serious disagreements remain over the objectivity of selection criteria.

airBaltic employs more than 3,000 people. Even if the final reduction is smaller than public speculation suggests, the consequences may extend beyond employees to the labour market, suppliers and aviation-related service businesses.

What does the estimate of 10,001 to 25,000 creditors reveal?

airBaltic’s US court petition estimates that the company has between 10,001 and 25,000 creditors. The published list of the 30 largest unsecured claims demonstrates the breadth of its obligations:

Pratt & Whitney — approximately USD 66.518 million;
Latvian Environment, Geology and Meteorology Centre — approximately USD 42.432 million;
the Latvian state, represented by the Ministry of Transport — approximately USD 20.067 million;
Latvian State Revenue Service — approximately USD 15.428 million;
Riga Airport — approximately USD 9.071 million.

These amounts are unsecured claims listed in the petition, not automatically recognised losses and not a complete calculation of airBaltic’s total liabilities. The reorganisation plan, creditor voting and court decisions will determine how much each creditor ultimately recovers.

State ownership and political accountability are also at stake

The Latvian state currently owns 88.37% of airBaltic, while Lufthansa holds 10%. A Chapter 11 reorganisation may reduce, amend or convert debt into equity, meaning that the final ownership structure should not be regarded as fixed.

This creates two separate public questions. The first is economic: how much of the state’s investment and claims can be preserved? The second is political: which decisions made over the past 20 years created a situation in which a state-controlled airline had to seek protection from a US bankruptcy court?

According to the government and the company, the new EUR 350 million financing is being provided by private international lenders. This does not mean that Latvian society has no remaining financial exposure: the state is both the majority shareholder and a creditor, while the State Revenue Service and other public institutions appear among the largest unsecured creditors.

Five questions that still require public answers

Which government decisions concerning airBaltic will be declassified, and when will they become publicly available?
What collateral and priority will the new DIP lenders receive after final court approval?
How much of airBaltic will the Latvian state retain after debt restructuring or conversion?
How many employees will be affected, and how will objective selection criteria be ensured?
Which routes, aircraft contracts and ACMI projects will be retained or terminated?

The main conclusion

airBaltic’s Chapter 11 case is neither a simple “defence programme” nor an automatic rescue. It is a court-controlled attempt to break the cycle of legacy debt, expensive financing and excessive capacity.

US court protection temporarily restricts creditors from acting individually against the company, but in return airBaltic must make painful decisions concerning its fleet, orders, ACMI business, jobs and potentially its ownership structure.

The most important public question is no longer simply whether airBaltic will continue flying. It is who will own the airline after the reorganisation, how much its survival will cost and what the government’s documents from the past 20 years will reveal.