Latvian carrier airBaltic faces a reconvened bondholder vote today that will determine whether its proposed recapitalisation proceeds, after an initial meeting on August 3 failed to reach the required quorum.
The vote covers proposals to convert part of airBaltic’s €380 million 2029 senior secured notes into equity, replace the remainder with up to €125 million in reduced new debt, and decide whether a €13.775 million interest payment that fell due on August 14 is paid in cash or capitalised.
The outcome underpins a revised business plan under which airBaltic will cut its Airbus A220-300 fleet from 54 aircraft to around 36 by the end of 2026, before growing gradually back to about 40 by 2031.
The airline has abandoned a previous plan, tied to a now-suspended initial public offering, to operate close to 100 A220s. Riga will remain the primary hub, with the network reshaped around point-to-point flying and stronger year-round ACMI operations intended to improve winter utilisation.
Operational headwinds and ratings pressure
airBaltic named constraints on Pratt & Whitney engine deliveries among the reasons for the revision, alongside moderated revenue growth and elevated costs linked to the conflicts in Ukraine and the Middle East.
Fitch Ratings downgraded the carrier’s long-term rating twice within four months, from B– to CCC+ in December 2025 and to CCC– in April 2026, and has flagged elevated default risk absent additional external support.
The Latvian state, which holds the large majority of airBaltic’s shares, intends to reduce its stake to at least 25% plus one share once the recapitalisation and any bondholder debt-to-equity conversion take effect. The government is separately asking the Saeima to extend the repayment deadline on an existing €30 million state loan from August 31 to December 31, and to approve its own participation in additional financing of up to €30 million alongside private creditors. Prime minister Andris Kulbergs has described the situation as very serious; advisers to the government have indicated that, without creditor support, existing shareholder value is effectively zero.
Distressed debt and operational continuity
airBaltic reported a Q1 2026 net loss of €70.1 million, more than double the prior-year period, against record quarterly revenue of €149.1 million, up 12.3% year on year.
Its 2029 bonds, which carry a 14.5% coupon, have been trading in deeply distressed territory, roughly low-teens to low-30s cents on the euro.
airBaltic president and chief executive Erno Hildén said the plan “makes disciplined choices that strengthen” the carrier’s long-term position.
The airline has stressed that published schedules, bookings and onboard services continue unaffected regardless of the vote.
However, a failure to secure a quorum for a second time would leave the restructuring unable to proceed as designed, raising the risk of default on the 2029 notes and forcing the Latvian government to consider options it has so far declined to specify.
