⭐️ airBaltic: Fitch downgrade, a new Airbus delivery — and a financial structure that leaves no room for illusions
Fitch’s decision to cut airBaltic’s rating to CCC+ marks a turning point that markets anticipated, but policymakers did not.
The downgrade signals one thing very clearly: the airline will require substantial external financing within the next 12 months. Not for growth — for liquidity.
1) A new Airbus A220-300 delivered the very next day
The arrival of the 51st A220-300 looks like a success milestone, but analysts read it differently:
the airline continues to absorb expensive long-term commitments at a time when its own capital base is under strain.
These deliveries are not optional — they are contractual. airBaltic cannot simply “pause” them without political or legal consequences.
Result: the fleet grows, while the balance sheet weakens.
2) A structure that has become risky
airBaltic now depends on three reinforcing pressure points:
Expensive debt: outstanding bonds with a 14.5% coupon — not market-rate financing but a distressed instrument from the moment of issuance.
ACMI dependence: a meaningful part of the fleet operates not in the Latvian market but for Lufthansa under wet-lease agreements. This provides revenue but reduces strategic autonomy and makes airBaltic a capacity provider rather than a market shaper.
Aircraft delivery schedule: Airbus contracts leave little room for maneuver — commitments must be honoured even when liquidity is tight.
3) Market chatter: €180–220 million needed
Fitch mentions €180 million in capital needs, but informal market estimates reach €220+ million.
Reasons:
ongoing engine issues related to PW1500G;
recurring aircraft downtime;
operating costs rising faster than revenue;
nine-month 2025 cash flow slightly positive but insufficient to service debt and cover future deliveries.
4) IPO in 2026: now off the table
A CCC+ rating effectively closes the IPO window.
To restart investor discussions, the airline would need:
lower leverage,
stable profitability,
positive free cash flow,
a clear and credible fleet-financing model.
None of these conditions is met today.
5) What comes next? Three realistic scenarios
A new capital injection by the Latvian state and Lufthansa to stabilise liquidity.
Restructuring of part of the debt and/or aircraft financing schedule.
Further expansion of ACMI operations, pushing airBaltic toward a Baltic capacity-provider model rather than a full-scale national carrier.
⭐️ Conclusion
airBaltic is not “in crisis” — it is already in a post-crisis correction phase, where liquidity, contractual inertia, and fleet obligations dictate more than strategy.
Fitch’s downgrade simply formalises what markets have understood for months:
without a significant capital injection, airBaltic will become financially unstable in the near term.
Image: photos/photo_91@03-12-2025_13-33-29.jpg