Bondholders in airBaltic have brought in Hogan Lovells as they start preparing for talks over the airline’s debt.
The move centres on the carrier’s EUR380 million bonds due in 2029, which have been sliding into deeply distressed territory. They started the year close to par, but are now trading at roughly 31 cents on the euro, a level that typically signals the market is pricing in serious restructuring risk.
Behind that is a cocktail of pressure points: tight liquidity, heavy fuel exposure and rising costs. airBaltic has only hedged around 10 percent of its fuel needs for 2026, leaving it exposed to swings in oil and jet fuel prices. At the same time, there is a potential EUR30 million short-term loan from the Latvian state to smooth over near-term funding needs.
There is also growing concern about what comes next. Fitch Ratings has cut the airline’s credit rating to CCC- from CCC+, warning that without meaningful external support the company could be facing a liquidity crisis within six to 12 months. It also downgraded the 2029 bonds to CCC-, reflecting what it sees as a materially increased risk of debt restructuring during 2026.
Fitch’s view is blunt: the airline is likely to need a significant equity injection to stay on track. That conclusion is driven by its forecasts showing negative free cash flow of around EUR160 million in 2026, with earnings not covering lease costs and bond interest.
At the end of 2025, cash stood at roughly EUR28 million, only just above the EUR25 million minimum liquidity requirement attached to its debt agreements. In other words, there is very little room for error.
The Latvian state remains the majority owner, and is still viewed as a key backstop, but Fitch notes that any support may be shaped by political constraints and EU state aid rules, which could slow or complicate intervention.
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Author: Edward Hardy
