Commercial Aviation
airBaltic Secures 257 Million Euro Interim Financing
airBaltic raises up to €257M via senior-priority bonds at 25% interest as it cuts its A220-300 fleet to 36 aircraft.
Latvian flag carrier airBaltic has secured up to €257 million ($298.5 million) in interim financing through the issuance of new senior-priority bonds, providing a critical liquidity bridge as the airline scales back its Airbus A220-300 fleet and navigates ongoing engine supply chain constraints.
Announced in a press release on September 3, 2026, the agreement involves third-party investors Polus Capital Management and Klirmark Capital 4. The financing is designed to support the airline’s revised business plan without requiring new direct financial contributions from the Latvian state, which remains a major shareholder.
Financing terms and bondholder approval
The short-term financing structure carries a notably high cost of capital. According to reporting by BNN-News, the new bonds feature a 25% annual interest rate and are scheduled to mature on February 26, 2027. The initial tranche will make €180 million available shortly after bondholder approval, with the remaining €77 million contingent upon additional conditions being met.
A bondholder meeting to approve the transaction is scheduled for September 11, 2026. Andrejs Martinovs, Chairman of the Supervisory Board of airBaltic, acknowledged the aggressive terms of the deal. In comments reported by BB.lv, Martinovs noted that while the agreement might initially appear shocking, it is a planned measure reflecting the high risks inherent in both the recapitalization process and the broader aviation sector.
Revised business plan and fleet reductions
The interim financing provides airBaltic with the runway needed to execute a revised business plan. The airline has faced a challenging operational environment driven by higher costs, geopolitical instability, and persistent supply chain bottlenecks affecting the Pratt & Whitney engines on its Airbus A220-300 fleet.
To stabilize operations, airBaltic is scaling back its previously ambitious growth targets. According to ch-aviation, the carrier plans to reduce its active fleet to 36 Airbus A220-300 aircraft by the end of 2026, down from 54, while concentrating its route network around its primary hub in Riga.
Erno Hildén, Chief Executive Officer of airBaltic, stated that the funding secures the liquidity required for the company’s next development phase. According to BNN-News, Hildén noted that the interim financing provides the time and resources necessary to implement targeted measures to strengthen the airline’s financial position, allowing operations to continue alongside the planned flight schedule.
AirPro News analysis
The 25% interest rate attached to these senior-priority bonds underscores the severe liquidity pressure airBaltic currently faces. We view this interim financing not as a sustainable capital structure, but as an expensive, necessary bridge to keep the airline operational while it prepares for a broader recapitalization or a potential initial public offering. By shrinking its active Airbus A220-300 fleet and focusing on its core Riga network, airBaltic is attempting to demonstrate financial discipline to future investors. The Latvian government’s decision to avoid direct capital injections shifts the immediate financial burden to private markets, albeit at a steep premium.
Sources: airBaltic
Photo Credit: airBaltic