Latvia's airBaltic gambled by filing for US bankruptcy, prime minister says 

Latvia’s airBaltic Files for US Bankruptcy to Seek Restructuring and Strategic Partner

airBaltic’s Bankruptcy Filing and Search for Strategic Partner

By Andrius Sytas

Background and Reasons for Bankruptcy

RIGA, Sept 30 (Reuters) - Latvian Prime Minister Andris Kulbergs said in an interview on Wednesday that the state-owned carrier airBaltic took a "gamble" by voluntarily filing for US Chapter 11 bankruptcy protection.  

"Of course, it's a gamble. Of course, things might not happen," Kulbergs told Reuters, without elaborating on the specific risks but adding that airBaltic needed to attract a strategic partner. 

Financial Struggles and Market Conditions

The carrier, struggling with a doubling of jet fuel prices this year due to conflict in the Middle East, filed on September 14 for restructuring under the US Bankruptcy Code in New York. At the time, the prime minister said it had been running out of money and unable to pay interest to bondholders. 

Ongoing Investor Talks

Despite the proceedings, Kulbergs said in the interview that his government continues to talk with potential investors in airBaltic.  

Political and Financial Implications

Domestic Political Challenges

Speaking ahead of an election on Saturday, with his party leading in polls, Kulbergs said restructuring airBaltic was politically difficult because the airline was a "very hot potato" domestically, where some see it as a drag on the country's finances. 

State Support and Financial Aid

 Latvia has propped up the company with tens of millions of euros in recent years, including issuing a €30 million ($34-million) emergency loan in April that was not repaid.

Future Prospects and Industry Response

Restructuring Plans

Kulbergs said the carrier needs to reduce debt, cut aircraft and align its network with profitable routes in order to draw interest from a strategic aviation partner. 

"The target is clear. Clean it up, get ready for marriage, have a strategic partner in, and fly afterwards," he said, declining to name the investors taking part in talks.

Ownership and Competition

The main airline at Riga airport, airBaltic is 88.37% state-owned, while Lufthansa holds 10%. 

Finnair and Wizz Air, a key rival, have each said they are not interested in investing in it. Ryanair, another rival, said it will double its traffic in the Baltic states as airBaltic restructures. 

Brand Reputation and Service

The prime minister said airBaltic delivers a good, modern service with a well-respected brand name. "It just needs to clean up its act," he said. 

($1 = 0.8819 euros)

(Reporting by Andrius Sytas; Editing by Jonathan Spicer )