Latvia's Prime Minister Called the Rescue of airBaltic a Last Chance
Latvian Prime Minister Andris Kulbergs stated that the current situation is the “last chance” to save the national airline airBaltic. According to him, the carrier’s insolvency would be the worst-case scenario.
A meeting of airBaltic’s creditors is scheduled for Monday, which will largely determine the company’s future, according to LSM English. The airline is seeking to negotiate a deferral of two consecutive interest payments, with these amounts to be added to the principal debt. The first payment, amounting to just under 14 million euros, was due last Friday.
To secure interim financing, airBaltic needs to raise an additional loan of 225 million euros. The company also needs 100 million euros in new capital. As part of the financial restructuring, the company plans to convert a portion of its existing bonds into shares.
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airBaltic’s new business plan calls for reducing the fleet by about one-third, focusing on more profitable routes, and cutting costs. The aviation industry union estimates that these measures could result in up to 30% of the carrier’s more than 3,000 employees losing their jobs.
airBaltic CEO Erno Hilden stated that the restructuring consists of two key parts: improving long-term profitability and strengthening the company’s balance sheet. At the same time, negotiations on bridge financing are ongoing, and there is no guarantee of their successful conclusion. The market price of airBaltic’s outstanding bonds has fallen by 80% since the beginning of the year.
The Latvian government has also decided to ask the Saeima for permission to extend, until the end of the year, the maturity date of a previously granted short-term loan of 30 million euros to airBaltic. Kulbergs emphasized that the state cannot be the sole source of funding, so private investors must also provide funds. According to his estimate, airBaltic’s operations account for approximately 1.5–2% of Latvia’s GDP.
