Latvia’s national carrier, AirBaltic, has filed for bankruptcy protection under the United States Chapter 11 process, seeking to restructure its debts amid a sharp rise in jet fuel prices driven by the ongoing conflict in Iran. The airline announced the filing on September 14, citing severe financial pressure caused by a combination of geopolitical and economic factors affecting the aviation sector worldwide.

AirBaltic highlighted that the war in Iran has led to a doubling of jet fuel costs, contributing to an industry-wide cash crunch. The surge in oil prices was reflected in Brent crude futures reaching $107.33 per barrel, up 2.6 percent. This environment has strained numerous carriers, particularly those less equipped to hedge against fuel price volatility.

The Latvian airline, which operates a fleet of about 50 Airbus A220-300 aircraft, carries approximately $583 million in debt and finance lease obligations, along with €106 million in overdue payroll and airline taxes and fees. It is majority-owned by the Latvian government, with Germany’s Lufthansa holding a 10 percent stake. To support its ongoing operations and restructuring efforts, AirBaltic has secured a €350 million financing package from a group of lenders including Strategic Value Partners, Barclays, Hayfin Capital Management, Morgan Stanley, and Oaktree Capital Management. The loan is subject to court approval and carries an interest rate of about 12 percent. Despite the bankruptcy proceedings, the airline assured that scheduled flights would continue uninterrupted and expects the restructuring to be completed by June 2027.

The financial strain on AirBaltic reflects broader challenges across the European aviation market, where rising fuel costs have forced some carriers to reassess their operations. Ryanair, Europe’s busiest short-haul airline, has already reduced its winter schedule and warned that sustained high oil prices could drive some less financially stable airlines into insolvency. Ryanair’s chief executive, Michael O’Leary, has previously suggested that competitors such as Wizz Air face significant risks due to their exposure to fuel expenses.

Wizz Air’s chief executive, Jozsef Varadi, echoed concerns about the liquidity pressures affecting airlines without effective fuel hedging strategies, predicting that some would face very difficult operating conditions in the months ahead. Market analysts at Panmure Liberum have similarly cautioned that the conflict in the Middle East may continue indefinitely, potentially keeping fuel prices elevated for the foreseeable future. The analysts urged airlines to reduce planned capacity to balance higher fuel costs with adjusted pricing, though noted that so far only the strongest carriers have taken such steps.

Following these developments, shares in European aviation companies weakened, with Wizz Air closing down 3.7 percent and IAG, the parent company of British Airways, falling 2.4 percent. The sector’s outlook remains uncertain as it grapples with the sustained impact of global geopolitical tensions on operating costs and profitability.