Why SmartLynx May Yet Find Its Way Back to Avia Solutions Group

The covert bankruptcy—legally framed as a “restructuring”—of SIA SmartLynx Airlines (Latvia), along with the highly probable collapse of SmartLynx Malta and SmartLynx Estonia in the near future, has become more than just a landmark event for the aviation market. Its consequences may amount to a full-fledged default tsunami, triggering a cascade of multimillion-euro non-payments across the industry.

Hundreds of SmartLynx employees have already been dismissed retroactively, without severance packages or any form of compensation. Many have still not received their final October salaries. This comes at a time when another ASG subsidiary, Avion Express, announced a mass recruitment drive just three weeks earlier.

Equally troubling is the way the parent company, Avia Solutions Group (Ireland/Lithuania), offloaded these troubled assets. In ethical terms, the SmartLynx collapses mark a clear line in the sand. Similar tricks have been attempted before, but those cases typically involved several hundred thousand euros, or at most a few million. In the rarest scenarios—tens of millions. But no one has ever dumped €238 million in one go.

And even this number, provided by SIA SmartLynx Airlines (Latvia) itself, appears to be significantly understated. Several creditors claim the airline owes them far more than what was listed in its creditor registry. When the liabilities of SmartLynx Malta and SmartLynx Estonia are added, the actual total could be staggering even by the standards of seasoned industry veterans.

Now that SmartLynx’s Maltese and Estonian entities have reportedly joined their Latvian counterpart in the “high-liquidity portfolio” of Stichting Break Point Distressed Assets Management, the Dutch firm is expected to unveil some sort of “Phoenix Plan”—echoing a similar storyline we saw with Madagascar Airlines. What will likely follow is a long, drawn-out burial of SmartLynx wrapped in grand promises about an imminent revival of the airline.

But beyond the sheer scale of the “lost” funds, what is striking is the almost demonstrative cynicism with which the entire operation was carried out. Avia Solutions Group did not even attempt to stretch the process over time. By legal standards, it was executed with lightning speed. Consider the timeline:

— 19 September 2025: Stichting Break Point Distressed Assets Management is registered in Amsterdam. Its nominal owner and director is a Cyprus-based lawyer, Elias Heracleous. BLACKLIST.AERO’s investigation revealed that Heracleous controls at least 70 Cypriot companies.
— 22 October 2025: Avia Solutions Group announces the sale of SIA SmartLynx Airlines to Stichting Break Point Distressed Assets Management (90%), with the remaining shares allocated to SmartLynx CEO Edvinas Demenius (5%) and CFO Mindaugas Kazakevicius (5%).
— 28 October 2025: SIA SmartLynx Airlines files for creditor protection in the Riga court (registration number 40003056133).

Many aviation professionals are puzzled by how a single SmartLynx entity could accumulate such enormous losses. A widely shared opinion is that Avia Solutions Group funneled the entire group’s losses into one “sacrificial vehicle”—a so-called “toxic bin” company used to dump liabilities and regulatory issues once nothing of value remains.

A proper forensic audit—normally an obligatory component of bankruptcy proceedings—might have clarified matters. But the so-called “sale” of the company significantly complicates any comprehensive investigation. Knowing who wasn’t paid is only half the story. Far more revealing would be understanding who actually was paid throughout the months of mounting defaults, whether those payments were justified, and whether the pricing of services was inflated or manipulated. Such an analysis could shed crucial light on where all the money actually went.

Even if one sets aside the ethical issues, a legal question arises: Did Avia Solutions Group truly shield itself from scrutiny as effectively as its lawyers believe?

A preliminary legal assessment suggests that under European law, Avia Solutions Group had no right to sell a subsidiary burdened with such debts without the consent of its creditors. A transaction may be annulled if it is proven to have been executed to the detriment of creditors. Across EU jurisdictions, the doctrine of fraudulent conveyance (transactions defrauding creditors) applies. A sale can be challenged if it:

• worsened the creditors’ position,
• deprived creditors of the ability to recover what they are owed,
• was structured to shield ASG from liability.

In such cases, creditors may seek:
• to have the transaction declared void,
• to restore SmartLynx to its original status,
• or to have the buyer recognized as a bad-faith acquirer.

This mirrors the UK’s doctrine of “Transaction Defrauding Creditors.”

Moreover, authorities in several European countries—those connected to the seller, the buyer, SIA SmartLynx Airlines, or the individuals involved—could initiate criminal proceedings for fraud conducted by an organized group, should creditors choose to pursue that route.

Although I am aware that at least one creditor has already filed a police complaint in Latvia, it is still unclear whether others will follow. But they should at least understand that they have this option—and that such a fight is far from hopeless.

Beyond the question of recovering money, the Avia Solutions Group–SmartLynx saga will inevitably become a defining case for the aviation industry. Either it will demonstrate that such “maneuvers” are ultimately self-destructive, or it will provide a powerful blueprint—an industry “lifehack”—for walking away from enormous debts with near-total impunity.