Latvia's national airline, airBaltic, has reached an agreement for bridge financing of up to €257 million with existing bondholders and third-party financing providers, including Polus Capital Management and Klirmark Capital 4. This financing, which carries a substantial 25% annual interest rate, is intended to bolster the company's liquidity and fund its new business plan. The proposal requires approval from airBaltic's bondholders and shareholders at a meeting scheduled for September 11. If approved, €180 million is expected to be available soon after bondholder consent, with an additional €77 million released upon fulfilling further conditions.
The financing involves the issuance of new, higher-ranking "super senior" bonds maturing on February 26, 2027. Existing bondholders, including the Latvian state, have the opportunity to participate in this new issuance pro-rata. airBaltic's Supervisory Board Chairman, Andrejs Martinovs, stated that this was the best financing airBaltic could secure currently, acknowledging that short-term bridge financing instruments are typically more expensive. He emphasized that the airline's business plan accounts for servicing these interest rates.
This interim financing is part of a broader strategy to strengthen airBaltic's financial position. The funds will be used to refinance existing aircraft and engine-related liabilities, as well as to cover ongoing operational costs like repairs, maintenance, and airport fees. The airline has assured that its flight schedule will remain unaffected throughout this process. The planned financing does not rely on financial participation from the Latvian state, though the state, as an existing bondholder, may choose to participate proportionally based on recently adopted legislation that allows it to buy up to €30 million in bridge-financing bonds.
The airline's revised business plan, approved by its Supervisory Board, includes a longer-term recapitalization of up to €225 million in new debt and €100 million in new equity. Part of the existing 2029 bonds may be converted into equity, and the remaining replaced with new, smaller debt of up to €125 million. Additionally, airBaltic plans to optimize its fleet, operating 36 Airbus A220-300 aircraft by the end of 2026, down from 54, with a gradual increase to around 40 by 2031. Last year, airBaltic's revenue increased to €779.344 million, with losses reduced to €44.337 million, and it carried 5.2 million passengers. The Latvian state holds 88.37% of airBaltic, while Lufthansa Group holds 10%.
Bondholders previously approved the capitalization of two interest payments (due August 14 and November 14) and a temporary waiver of minimum liquidity requirements until November 2026, providing crucial near-term flexibility. airBaltic has suspended its potential initial public offering, not considering it a source of capital for 2026. The urgent promulgation of the airBaltic Financial Stabilisation Measures Law by the Latvian President on August 25 allows the government to potentially participate in the bond purchase and convert state loans and bonds into airBaltic equity.
