AirBaltic and Chapter 11: What Does U.S. Restructuring Mean for Latvian Creditors and Passengers?

september 15, 2026 Uudised

On 14 September 2026, the national airline Air Baltic Corporation AS (hereinafter referred to as Air Baltic announced the commencement of debt restructuring proceedings in the United States under the applicable U.S. Chapter 11 regulations. Passengers are being reassured by the claim that flights will continue, tickets will remain available for purchase, and that nothing will change in their day-to-day lives as a result.

As an enthusiast of cross-border insolvency proceedings, this news caught my attention, so I spent some time looking into what it means for Air Baltic’s creditors and for us as passengers.

Why is the restructuring of a Latvian company taking place in the United States?

Most likely, this is because the financiers are willing to provide EUR 350 million in financing to enable AirBaltic to implement its restructuring, and because of the global reach and effect of the U.S. proceedings.

A Chapter 11 petition may be filed by any person that has a domicile, place of business, or property in the United States. The existence of contractual relationships with U.S. suppliers or creditors, or the presence of creditors in the United States, often serves as a basis for establishing U.S. jurisdiction. This is likely what has occurred in the AirBaltic’s case, given that one of its largest creditors is the U.S. company Pratt & Whitney, with a claim of EUR 66.5 million. Accordingly, it can be presumed that AirBaltic has satisfied the requirements of Section 109(a) of the U.S. Bankruptcy Code for eligibility to file for Chapter 11.

Chapter 11, similar to the legal protection process in Latvia, grants the debtor the right to impose a moratorium on actions by creditors and to restructure its obligations within a period set by the court. Unlike Latvia’s legal protection framework, the moratorium established under U.S. law is intended to have global effect and to apply worldwide. It should be acknowledged, however, that this approach is largely declaratory in nature and reflects the universal approach adopted by major jurisdictions in relation to insolvency and restructuring proceedings. In practice, however, such a U.S. court order is not directly binding outside the United States, except in jurisdictions with which the United States has entered into treaties providing for the mutual recognition of insolvency proceedings.

Is a U.S. court ruling binding on Latvian creditors?

Chapter 11 proceedings are not automatically recognized or enforceable in Latvia. Similarly, Chapter 15, which provides for the recognition of foreign insolvency proceedings, is not binding on Latvia. Consequently, the moratorium imposed by the U.S. court does not directly apply in Latvia. However, there are several legal mechanisms under which AirBaltic could seek to stay legal proceedings or the enforcement of a judgment against it in Latvia.

AirBaltic may seek recognition of the U.S. court’s order in Latvia and in other jurisdictions where it does not have direct effect. Chapter 77 of the Latvian Civil Procedure Law sets out the procedure for the recognition of foreign court rulings. However, a foreign court ruling will not be recognized if the court finds grounds for refusing recognition. Such grounds could potentially arise, among other things, from questions regarding the jurisdiction of the U.S. court, given that AirBaltic is a company registered in the Republic of Latvia and that its insolvency and restructuring proceedings mandatorily are subject to Latvian law. Similarly, objections could be raised as to whether the U.S. court was required to apply a different law, as well as whether such a judgment would be contrary to the public policy of the Republic of Latvia.

It should be noted that Section 2, Paragraph 6 of the Latvian Insolvency Law directly provides that the rules of this Law shall apply to actions involving aircraft objects in legal protection proceedings and insolvency proceedings, in compliance with the provisions specified in the Law “On Aviation”.

With regard to creditors’ claims before the courts, it should be noted that the Civil Procedure Law provides that the court may stay the proceedings in certain cases, for example, if the hearing of the case is not possible until another case is adjudicated in another court. Air Baltic could argue in court that it is expedient to stay the proceedings while the US Chapter 11 process is ongoing, as the outcome of this process could significantly affect the prospects of satisfying the claim.

It should also be noted that the restructuring proceedings initiated in the United States are unlikely to prevent AirBaltic from initiating legal protection proceedings in Latvia. This factor alone would most likely not provide foreign creditors with sufficient grounds to refrain from issuing a grounding notice that could bring AirBaltic’s operations to a halt, as occurred in the case of SmartLynx.

Will airBaltic Continue Flying?

To ensure the continued operation of AirBaltic’s flights, it is essential to reach agreements with aircraft lessors and key service providers. If AirBaltic owes outstanding amounts to aircraft lessors, the lessors may be entitled to seek the suspension of flights under the Cape Town Convention by issuing a so-called grounding notice.

A moratorium imposed by a U.S. court is binding on U.S. companies and institutions. Therefore, issuing a grounding notice during the Chapter 11 proceedings would constitute a violation of the automatic moratorium. However, aircraft lessors may petition the U.S. bankruptcy court for relief from the moratorium with respect to a specific aircraft. In deciding whether to grant such relief, the court must balance the interests of the lessor, the debtor, and the creditors as a whole.

At the same time, several of AirBaltic’s creditors and aircraft lessors are located outside the United States and jurisdictions where U.S. bankruptcy court orders are automatically recognized. Therefore, the moratorium does not directly apply to them, and the Cape Town Convention takes precedence over it.

However, it should be acknowledged that global market participants generally comply with such a moratorium, even where it is not directly binding on them, as they may nevertheless be subject to proceedings before a U.S. bankruptcy court for non-compliance, which could result in fines, sanctions, and damages being imposed in respect of the debtor or its assets in the United States. Accordingly, there is a relatively high likelihood that aircraft lessors will refrain from issuing grounding notices, as doing so could constitute a violation of the moratorium imposed by the U.S. court.

In practice, this conflict is usually resolved through negotiations, with the lessors and the debtor agreeing to the continued use of the aircraft in exchange for adequate protection, such as regular lease payments funded through the restructuring financing.

From these brief reflections, it must be concluded that today we can feel safer about purchasing tickets and traveling with AirBaltic than yesterday. However, this is only the first step towards achieving financial stability.