Air Baltic downgraded to default after Chapter 11 filing

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Air Baltic downgraded after Chapter 11

Highlights

Fitch Ratings downgrades Air Baltic's Long-Term Issuer Default Rating to 'D' and EUR380 million bonds to 'C' following Chapter 11 filing on 14 September 2026.
Air Baltic secures EUR350 million debtor-in-possession financing, gaining interim U.S. court access to support liquidity and operations during restructuring.
Fitch cites extremely weak liquidity, an unsustainable capital structure, and limited state support due to EU aid rules and political constraints, with no expected contagion risk for Latvia.

Rating cut follows U.S. bankruptcy move

As reported by Fitch Ratings, Air Baltic Corporation AS's Long-Term Issuer Default Rating is downgraded to 'D' from 'CC', while its EUR380 million senior secured bonds are cut to 'C' from 'CC'. The Recovery Rating is revised to 'RR5' from 'RR4', and the Standalone Credit Profile is lowered to 'd' from 'cc'.

The rating action follows the airline's 14 September 2026 announcement that it voluntarily initiates proceedings under Chapter 11 of the U.S. Bankruptcy Code. Fitch says the filing drives the downgrade to default status because the company is restructuring its financial obligations under court protection.

Air Baltic says it secures a commitment for EUR350 million in new debtor-in-possession financing to support liquidity and operations during the process. A U.S. court grants relief and interim access to that funding, allowing the carrier to continue its financial reorganisation under court supervision as it works toward a more sustainable capital structure and lower cost base.

Liquidity pressure and state support constraints

The Chapter 11 filing comes after bondholders approve on 17 August 2026 the capitalisation of two coupon payments due on 14 August and 14 November, and waive the minimum liquidity and bond service reserve requirements until 14 November. Fitch treats that step as a distressed debt exchange, after which the airline is re-rated at 'CC' because of extremely weak liquidity and what it describes as an unsustainable capital structure.

According to Fitch, the company's executive board determines that the EUR350 million debtor-in-possession package available through Chapter 11 offers a more favourable and deliverable outcome than previously planned interim financing of EUR225 million. Following an interim court order on 16 September, the airline says it can continue operations and make payments to suppliers and employees, while the financing should give it time to restructure both operations and fleet size.

Fitch also says Latvia's government retains a strong sense of responsibility toward airBaltic because of its strategic role in connectivity, but the incentive to provide support is not strong enough to underpin the rating. The agency says EU state aid rules and political considerations may hinder timely and large equity-style support, and it does not expect contagion risk for Latvia from the airline's default.

In our earlier article on Fitch’s affirmation of Clifford Capital Holdings’ AAA ratings, we explained that the agency kept the outlook stable largely because of the very high likelihood of state support and extensive government guarantees covering most adjusted debt. We also noted that this backing strengthens funding access and resilience even as profitability softened, underscoring how external support frameworks can materially influence credit outcomes.

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