Experts: AirBaltic's business plan is logical, but much depends on bondholders
Economists say the new business plan of Latvian airline AirBaltic, which involves shrinking its fleet and securing fresh financing, is reasonable, but its success largely hinges on the decision of bondholders.
Economists say AirBaltic's new business plan, which involves reducing its aircraft fleet and attracting new financing, appears logical, though its success will depend heavily on how bondholders respond.
Economist Aivars Strakšs recalled the airline's previous plan, saying the company had effectively turned into an aircraft-purchasing enterprise. In his view, the new plan brings AirBaltic back to sound business logic. He said that under the influence of consultant Seabury and a new chief executive, the company began doing what was actually needed — matching its fleet size to real demand, which explains the planned reduction to roughly 36 aircraft. According to Strakšs, the company will likely try to terminate contracts for the remaining planes, though it remains unclear whether penalties will apply. He called the plan's direction correct and positive for the business, while noting that some of the figures in it do not fully add up. He added that success will ultimately depend on whether the company manages to restructure its debt and raise new funds.
Financing is the key issue
Financial consultant Raitis Loginš likewise stressed that the central questions are who will provide the company with new funding and how debt will be converted into equity. He explained that earlier discussions focused on adding interest owed to bondholders onto the principal debt amount, deferring payment to preserve scarce liquidity. Now, he said, the plan has moved to the next stage — converting bonds into AirBaltic equity, turning bondholders into shareholders. Loginš described this as a highly significant decision, noting that the whole plan's implementation essentially depends on bondholders' consent.
At this stage, there is no discussion of paying out interest or principal to anyone — everything hinges on whether bondholders agree to the proposed approach. It therefore matters greatly whether the bondholders' meeting scheduled for Monday, August 17 — after an earlier attempt on August 3 failed to take place — will go ahead, and whether enough votes will be gathered to approve the strategy.
