airBaltic agrees terms for up to €257 million in interim financing

airBaltic has agreed terms with existing bondholders and third-party finance providers for up to €257 million in interim financing, providing a potential financial bridge while the Latvian airline implements its sweeping restructuring programme. The agreement represents an important step forward from the €225 million financing requirement outlined in its revised business plan last month.

The financing remains subject to approval from airBaltic’s bondholders and shareholders, with a bondholder meeting scheduled for 11 September.

If the necessary approvals are obtained, €180 million is expected to become available shortly afterwards. A further €77 million would be released once additional conditions have been satisfied.

The finance providers have committed to make the full amount available, subject to those approvals and conditions.

The interim financing will take the form of new bonds maturing on 26 February 2027, underlining its role as a short-term bridge rather than a permanent solution to airBaltic’s financial problems.

“The proposed financing gives us a clear path to secure the liquidity airBaltic needs for the next phase of its development,” said CEO Erno Hildén.

“Our revised business plan requires us to take decisive steps to strengthen the company’s financial position and build a more efficient and self-sufficient airline.”

Hildén said the financing would give airBaltic the time and resources necessary to implement the restructuring while continuing normal flight operations.

More financing than originally sought

The agreement represents a significant development since airBaltic unveiled its revised business plan in August.

At the time, the airline said it needed €225 million in interim financing to meet near-term liquidity requirements and bridge the company towards a more permanent recapitalisation.

The package now agreed is worth up to €257 million – €32 million more than originally envisaged.

Importantly, airBaltic says the financing is not conditional on another financial contribution from the Latvian government.

The Latvian State, already an airBaltic bondholder, may nevertheless participate proportionally to its existing bondholding under recently adopted legislation.

Existing private bondholders will similarly have an opportunity to participate.

Financing supports radical restructuring

The additional liquidity is intended to provide airBaltic with sufficient time to implement the major restructuring announced last month.

The revised strategy represents a dramatic retreat from the airline’s previous expansion plans.

Instead of expanding towards a fleet of around 100 Airbus A220-300s, airBaltic expects to reduce its fleet from 54 aircraft to approximately 36 by the end of 2026, before gradually rebuilding it to around 40 aircraft by 2031.

Scheduled capacity is expected to fall by around 9% in 2027.

The network is also being reshaped around Riga as airBaltic’s primary hub, while Tallinn and particularly Vilnius will have considerably smaller point-to-point operations.

The recently announced summer 2027 programme illustrates the scale of the change. airBaltic plans 57 direct destinations from Riga, compared with 13 from Tallinn and only eight from Vilnius.

At the same time, frequencies are being increased on stronger routes from Riga, including London Gatwick, Paris, Vienna, Barcelona and Rome.

The strategy therefore involves concentrating capacity on routes offering the strongest demand and revenue potential while eliminating or reducing weaker services.

Only a bridge to the next financing round

Despite its size, the €257 million package does not solve airBaltic’s longer-term capital problem.

The new bonds mature in February 2027, giving the airline less than six months from the planned September approval to implement the next stage of its financial restructuring.

Under the business plan announced in August, airBaltic ultimately intends to raise up to €225 million in new longer-term debt and €100 million in new equity.

Part of its existing 2029 Senior Secured Notes is also expected to be converted into equity, while the remaining portion would be replaced by reduced debt of up to €125 million. Selected other obligations could similarly be partially converted into equity.

The objective is to bring airBaltic’s exceptionally high leverage down to more sustainable levels.

Net debt stood at 8.94 times EBITDAR in 2025. The airline’s plan envisages reducing that ratio to around 4.8 following recapitalisation at the end of 2026, 2.4 by 2029 and 1.6 by 2031.

Important step, but restructuring still has to deliver

Securing commitments for €257 million therefore removes one of the most immediate threats facing airBaltic, provided creditors and shareholders approve the transaction on the proposed terms.

It also gives management breathing space to implement the fleet, network and cost reductions contained in the revised business plan.

But the unusually short maturity of the new financing demonstrates that this is essentially bridge financing rather than a rescue package providing a long-term solution.

The decisive phase will come over the next six months.

airBaltic must simultaneously shrink its fleet, rationalise its network, deliver approximately €45 million in recurring annual improvements, secure permanent debt and equity financing and negotiate the restructuring of its existing obligations.

The airline has therefore cleared an important financing hurdle – but the much larger task of repairing its balance sheet remains ahead.