Latvia's airBaltic voluntarily filed for protection under Chapter 11 of the U.S. Bankruptcy Code in New York, it said on Monday, ​as it seeks to restructure its debt pile and survive a deepening sector-wide crisis brought on by the Iran war.

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.

The funding, at a rate of about 12%, is subject to approval by the court, airBaltic CEO Erno Hilden told a press conference.

"In the coming months we will engage with all our stakeholders ​to agree on sustainable terms," he said, adding that the company is looking at €44 million profit improvement annually.

AirBaltic said flights would operate as scheduled during ​the court-supervised process which it expects to finish by June next year.

The U.S. war with Iran has caused jet fuel prices ⁠to double, sparking the air travel sector's worst crisis since the COVID-19 pandemic. Investors and executives have warned that carriers with stretched balance sheets risked collapse.

"AirBaltic has been experiencing ​acute financial stress due to a combination of financial and geopolitical factors," the airline's board wrote in a filing with the bankruptcy court.

AirBaltic has approximately $583 million in funded ​debt and finance lease liabilities, and it owes €106 million in payroll taxes and airline taxes and fees, it wrote in the filing.

Its 2025 revenue was approximately €779 million.

'ONE OF THE BEST OPTIONS' TO KEEP AIRBALTIC GOING

AirBaltic, which has a fleet of some 50 Airbus A220-300 planes, is majority-owned by the Latvian government, with Germany's Lufthansa holding a 10% minority stake.

Before the filing, airBaltic's bondholders had been due to vote ​on the company's plan to raise up to €257 million through new super-senior debt due in February 2027, at a rate of 25%.

Latvian Prime Minister Andris Kulbergs said ​the Chapter 11 proceedings were initiated after bondholders with over 70% of the value of the debt decided to opt for liquidation instead.

"I view this solution as one of the best options ‌for ensuring ⁠airBaltic's viability, as it provides the necessary tools and time to implement the restructuring plan," Kulbergs said in a statement.

The government is continuing to look for a strategic investor as airBaltic reduces its fleet and reorganises obligations, he added.

AirBaltic is the second airline casualty linked to the Iran war after Spirit Airlines collapsed in May. The U.S. discount carrier, which filed for bankruptcy months before the conflict began in late February, had failed to secure creditor support for a government bailout plan.

Other airlines like AirAsia, Southeast Asia's largest budget ​carrier, are seeking fresh capital.

CHAPTER 11 OFFERS PROTECTION ​FROM CREDITORS

Hilden, who led Scandinavian airline ⁠SAS through its Chapter 11 proceedings during 2022-2024, said airBaltic is "targeting (the) same process".

"This gives them a protective framework to put their house in order... I don't see why airBaltic wouldn't do the same as SAS," said John Strickland, an analyst.

Yves Schwyter, founder of ​aviation capital risk intelligence firm Vectus Intelligence, said the Chapter 11 route was a "probably more sustainable capital structure than what ​was on the table ⁠a week ago."

The airline had aimed to grow its fleet to 100 planes, and, according to aviation analyst Simonas Bartkus, was expecting to develop transit traffic from Russia, Belarus and Ukraine through Riga.

"This is no longer available, and the company became too large for its market... The rise in fuel costs made the situation acute, they had no time to ⁠find a solution," he ​said.

Prime Minister Kulbergs said in a video on X that by April airBaltic had "burned through" €380 million raised via bonds issued ​in 2024. A €30 million emergency government loan ran out in June, he added, and the airline had tried to lease out its excess aircraft.

"Serving Baltic and Latvian routes requires only 30 aircraft, not 100," he said.