AirBaltic Files for Chapter 11 Bankruptcy Amid Iran War and Rising Jet Fuel Costs
AirBaltic's Bankruptcy Filing and Industry Impact
Background and Reasons for Filing
Sept 14 (Reuters) - Latvia's airBaltic voluntarily filed for protection under Chapter 11 of the U.S. Bankruptcy Code in New York, it said on Monday, as part of a restructuring to reduce debt as the Iran war piles stress on the airline sector.
Securing Financing During Restructuring
AirBaltic said in a statement it had secured a commitment for €350 million ($405 million) in financing from lenders including Strategic Value Partners, Barclays, Hayfin Capital Management, Morgan Stanley and Oaktree Capital Management to support its operations during the restructuring.
Industry-Wide Crisis Triggered by the Iran War
Jet Fuel Price Surge
The U.S. war with Iran has caused jet fuel prices to double, provoking the air travel industry's worst crisis since the COVID-19 pandemic.
Vulnerable Carriers and Financial Exposure
Investors and executives have warned for months that carriers with stretched balance sheets and higher exposure to the volatility in oil prices would be the hardest-hit by the conflict.
AirBaltic's Restructuring Strategy
Protection from Creditors
AirBaltic, which is majority owned by the Latvian government, said its decision aimed to gain protection from creditors as it negotiates a restructuring of its debt. Flights would operate as scheduled during the court-supervised process, it added.
Comparison to Other Airline Bankruptcies
It is now the second airline casualty linked to the war following the collapse in May of U.S. discount carrier Spirit Airlines, which had failed to secure creditor support for a U.S. government bailout plan.
Financial Pressures and Broader Industry Response
State Loans and Liquidity Challenges
On top of financial pressures that had already prompted a €30 million Latvian state loan in April, AirBaltic's liquidity position deteriorated further in recent months due to increased fuel costs.
Other Airlines Facing Similar Challenges
AirAsia's Response
Other airlines like AirAsia, Southeast Asia's largest budget carrier, are seeking fresh capital amid mounting financial pressure due to rising jet fuel costs and heavy foreign exchange losses.
($1 = 0.8653 euros)
(Reporting by Gianluca Lo Nostro in Gdansk, Andrius Sytas in Vilnius; Editing by Stine Jacobsen, Milla Nissi-Prussak and Joe Bavier)
