Originally Posted by
D Bru
As recently as 10 Apr 2026 Fitch Ratings has downgraded Air Baltic Corporation AS's (airBaltic) Long-Term Issuer Default Rating (IDR) to 'CCC-' from 'CCC+'. Fitch has also downgraded airBaltic's senior secured long-term rating on EUR380 million bonds to 'CCC-' from 'B-'. The Recovery Rating is 'RR4'.
Fitch Ratings is the same rating agency that gave Lehman Brothers a strong, investment-grade (AA) credit rating in April 2008, less than 5 months before Lehman Brothers filed for chapter 11 bankruptcy with over $600 billion in assets suddenly worth close to zero (a 93% drop in share value)
Fitch Ratings also maintained a very high investment grade rating (AA+) on AIG (American International Group) less than four months before it also collapsed requiring a massive $85 billion emergency bailout from the Federal Reserve on September 16, 2008.
It is not uncommon for airlines to carry 'junk' debt. Indeed, approximately 80% of rated airlines hold non-investment grade (high-yield or speculative) debt, as of mid-2024.
This isn't a criticism of a particular airline. It is the nature of airline operations which require significant amounts of capital and small profit margins on high turnover.
Airlines that have maintained investment grade status (e.g. Qantas, Delta, Lufthansa, Southwest, Alaska, Ryanair, WestJet) are the exception, not the rule.
Look at Lufthansa with its announcements of 16 April 2026 immediately withdrawing the entire 27 aircraft fleet of Lufthansa CityLine fleet (
https://newsroom.lufthansagroup.com/...mplementation/) and on 21 April 2026 announcing effectively the removal of 20,000 flights from the summer 2026 schedule (
https://newsroom.lufthansagroup.com/...-all-six-hubs/).
Air Baltic does carry a debt pile (€1.3 billion) as does Lufthansa (€14.5 billion). It is certainly a very tough time for the airline industry globally, with Jet A-1
highly refined kerosene-based fuel at record prices (and even the risk of scarcity), interest rates at record highs, inflation creeping back into major economies and the risk of a sharp economic downturn.
Certainly, Air Baltic is exposed having a large debt pile. It is not a good market for Air Baltic's proposed IPO (initial Public Offering) which I suspect will be delayed until current high-interest rates, fuel price volatility, and geopolitical uncertainties abate somewhat.
Whether the government of Latvia, the current majority shareholder of Air Baltic, can wait until then, only time will tell. The second largest shareholder (Lufthansa with 10%) seems to currently be having their own difficulties with debt servicing.
I also think of the adage, 'how do you make a small fortune?' Answer: 'Invest a large fortune in an airline!'
There is also the other apocryphal statement, but no less liklely to be untrue, that the total cumulative net profit for the entire airline industry since the Wright Brothers' first flight in 1903 is zero or potentially negative. It seems you need to be 'brave' (or perhaps stupid) to invest in airlines as the capital costs are huge, with enormous geopolitical uncertainties, volatile fuel prices (the largest input cost) and very small profit margins.
It is easy to understand why so very few airlines consistently make a decent return