airBaltic is cutting its fleet and costs — but will that be enough to return to profit?

Under the new plan, the number of Airbus A220-300s operated by airBaltic is expected to fall from 54 to around 36 by the end of 2026. The fleet would then grow only gradually, reaching roughly 40 aircraft by 2031. As recently as March 2026, airBaltic’s published fleet plan still envisaged 99 aircraft by the end of 2032.

That amounts to a fundamental change in direction. Instead of pursuing rapid expansion, airBaltic is now focusing on cash generation, a more demand-driven network and more efficient use of its aircraft.

Losses narrowed, but underlying profitability deteriorated

airBaltic’s revenue rose to €779.3 million in 2025. Its reported net loss narrowed from €118.2 million in 2024 to €44.3 million.

On the face of it, that looks like a substantial improvement, but the result was heavily influenced by currency movements. Revaluation of US-dollar-denominated liabilities improved the reported result by €60.8 million.

On the company’s management-comparable basis, the 2025 loss was €99.0 million, compared with €42.1 million a year earlier. Management EBITDAR also fell, from €184.2 million to €150.1 million.

Revenue therefore increased, but underlying operating profitability weakened.

Costs rose mainly outside fuel

airBaltic’s normalised unit cost increased by six per cent in 2025. The biggest increases came from CO₂ emission allowances, navigation charges, labour and maintenance, while fuel unit cost fell by seven per cent. The airline’s losses therefore cannot be explained simply by high fuel prices.

Additional pressure came from availability problems affecting the Pratt & Whitney engines used on the Airbus A220 fleet. Aircraft were grounded for extended periods during 2025, and airBaltic used ACMI-in replacement capacity during the summer. Because lease payments and other fixed costs continue even when an aircraft is not flying, poor availability reduced the efficiency of the overall fleet.

The Middle East crisis hit at a bad time

This year brought another layer of pressure as the escalation of the conflict involving Iran disrupted operations and drove fuel-price volatility. For safety reasons, airBaltic suspended flights to Dubai and Tel Aviv and reduced parts of its schedule.

The company’s liquidity position was tight enough that it unwound its remaining fuel hedge in March. The position covered around ten per cent of its fuel exposure and generated €5.1 million in proceeds, strengthening the airline’s short-term cash position.

From a liquidity perspective, that was a telling move. Airlines normally hedge fuel precisely to protect themselves against sudden price increases. airBaltic gave up that protection as the fuel market became unusually volatile because the immediate value of the cash had become more important.

At the end of March, airBaltic had just €16 million in unrestricted cash and a further €17 million in restricted cash. Lease liabilities totalled around €884 million, while borrowings stood at roughly €473 million. Equity was negative at €249 million.

Liquidity is the biggest problem in 2026

In the first quarter of this year, airBaltic’s revenue increased by 12 per cent to €149.1 million. Adjusted EBITDAR improved to a positive €7.0 million from a €4.3 million loss a year earlier.

The net loss nevertheless widened to €70.1 million. The deterioration was driven primarily by foreign-exchange effects and lower commercial support than in the first quarter of 2025.

At the end of March, the airline had only €16 million of unrestricted cash. Lease liabilities were around €884 million and borrowings €473 million, while equity stood at negative €249 million. That makes liquidity and financing, rather than demand alone, airBaltic’s central problem.

A 14.5 per cent bond is extremely expensive

airBaltic has €380 million of senior secured notes due in 2029 carrying a 14.5 per cent coupon. Before any restructuring or capitalisation of interest, that coupon corresponds to about €55.1 million a year.

By comparison, the airline expects its entire new cost-cutting and revenue programme to generate around €45 million in recurring annual benefits. The two figures are not directly comparable accounting measures, but they illustrate the scale of the financing burden. Cost reductions alone cannot solve the problem if the expensive debt remains largely intact.

A smaller fleet could improve efficiency

Reducing the operating fleet to around 36 aircraft could allow airBaltic to withdraw capacity from its weakest routes and use the remaining aircraft more intensively.

The airline also plans to increase the role of ACMI flying, under which it operates aircraft for other airlines together with crew, maintenance and insurance.

In 2025, airBaltic generated €157 million from ACMI-out operations, equivalent to 20.3 per cent of total group revenue. In the first quarter of 2026, ACMI-out revenue rose by a further 29 per cent year on year to €21.3 million.

ACMI can reduce exposure to the seasonality of the Baltic market and provide steadier utilisation of aircraft across the year.

A first-quarter loss is not unusual in aviation

airBaltic’s €70.1 million first-quarter net loss should also be viewed in the context of aviation seasonality.

The first quarter is typically weak for European airlines. In EUROCONTROL’s sample of nine airlines or airline groups, only two — IAG and Turkish Airlines — reported an operating profit in the first quarter of 2026.

IAG made €351 million and Turkish Airlines €271 million in operating profit. Lufthansa Group posted an operating loss of €612 million, Air France-KLM lost €27 million, while Finnair was effectively around break-even with a €0.6 million operating loss.

Across the nine companies or groups, the combined operating loss was €1.17 billion. Even so, that was 34 per cent better than a year earlier. A first-quarter loss alone therefore does not prove that an airline’s business model is unworkable.

Regional aviation offers another warning sign

airBaltic does not fit neatly into the traditional definition of a regional airline. The A220 is larger and has greater range than the aircraft typically used by regional carriers, while airBaltic also performs a network-carrier role at its Riga hub.

Even so, the airline operates under many of the same economic constraints: small home markets, a high share of relatively short European routes, strong seasonality and limited ability to spread risk across several large markets.

According to EUROCONTROL, low-cost carriers and mainline operators each accounted for around 35 per cent of European flights on a year-to-date basis in late May 2026. The regional segment accounted for 12 per cent, one percentage point less than in 2025.

During the week of 18–24 May, regional airlines operated seven per cent fewer flights than in the equivalent period a year earlier, while low-cost traffic was up four per cent and mainline traffic by two per cent.

That does not mean airBaltic’s own market is shrinking by seven per cent, but it does point to a broader trend: the current European market has been less favourable to the regional segment than to low-cost and mainline operators.

The airline industry as a whole remains profitable

airBaltic’s difficulties do not mean the wider airline industry is loss-making. IATA forecasts a global airline net profit of around $23 billion in 2026 and about $9.6 billion for European carriers.

Margins remain thin, however. IATA expects a global net margin of just 2.0 per cent in 2026 and 3.1 per cent in Europe, with high fuel costs and structural operating expenses continuing to pressure profitability.

That leaves highly leveraged airlines particularly exposed. In a business with margins of only a few per cent, a single unexpected cost shock can quickly wipe out a year’s profit.

Can the new plan return airBaltic to profit?

Possibly — but only if the airline can repair its balance sheet and secure sufficient liquidity alongside shrinking the fleet and cutting costs.

Around €45 million in recurring annual benefits would make a meaningful difference, but that figure is not directly comparable with airBaltic’s €99 million management-comparable net loss for 2025 and should not be treated as a simple one-for-one offset.

More important is reducing or refinancing the €380 million of 2029 notes carrying the 14.5 per cent coupon. The current restructuring proposal envisages converting part of those notes into equity and replacing the remaining portion with up to €125 million of reduced debt. The broader recapitalisation plan also calls for new debt and equity financing.

If that succeeds, a smaller fleet, better utilisation and a growing ACMI business could move airBaltic towards a more sustainable economic model.

If the expensive legacy debt remains largely intact and is simply supplemented with more borrowing, the underlying problem will only be postponed.

airBaltic’s new strategy therefore moves in a more economically rational direction than its previous high-growth plan. But the airline’s future will be determined above all by how much it can reduce its debt burden, financing costs and liquidity risk — not simply by how many aircraft remain in the fleet.