Avianca files for bankruptcy protection as COVID-19 impact hits hard

COLOMBIA/US. Colombian airline group Avianca Holdings has filed for bankruptcy protection in a New York court. The company yesterday filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code, saying the move was “necessitated by the unforeseeable impact of the COVID-19 pandemic”.

LifeMiles, Avianca’s loyalty programme, is administered by a separate company and is not part of the Chapter 11 filing.

Avianca’s scheduled passenger operations have been grounded since mid-March, reducing its consolidated revenue by over -80% and placing pressure on its cash reserves. The airline carried 30.5 million passengers in 2019.

Through the Chapter 11 reorganisation process, Avianca said it plans to protect and preserve operations so it can continue to operate and ensure its status as Colombia’s flagship carrier. The airline has a strong position in the Colombia domestic market and provides services across South America, North America and European markets.

Of the countries in which Avianca operates, 88% have total or partial passenger air transport restrictions, forcing the airline to take a series of “extraordinary and structural measures,” it said

“Avianca is facing the most challenging crisis in our 100-year history as we navigate the effects of the COVID-19 pandemic,” said CEO Anko van der Werff. “Despite the positive results yielded by our ‘Avianca 2021’ plan, we believe that, in the face of a complete grounding of our passenger fleet and a recovery that will be gradual, entering into this process is a necessary step to address our financial challenges.”

Avianca, like many other airlines, is seeking financial support from the governments of the countries where it provides services. It is in discussions with the government of Colombia, as well as those of its other key markets about financing structures that would provide additional liquidity through the Chapter 11 process, it said.

Van der Werff added: “We believe that a reorganisation under Chapter 11 is the best path forward to protect the essential air travel and air transport services that we provide across Colombia and other markets throughout Latin America. Avianca has operated for more than 100 years – only the second airline in the world to achieve this milestone. We are confident that through this process we can continue to execute our ‘Avianca 2021’ plan, optimise our capital structure and fleet of aircrafts and – with government support – emerge as a better, more efficient airline that operates for many more years.”

The company noted that it continues to have high fixed costs. Of the countries in which Avianca operates, 88% have total or partial passenger air transport restrictions, forcing the airline to take a series of “extraordinary and structural measures”.

These have included employee furloughs, temporary wage reductions, reductions in non-essential capital expenditures and temporary deferred payments on long-term leases.

In parallel to its Chapter 11 filing in the US, Avianca intends to wind down its operations in Peru. It said: “This decision supports essential right-sizing efforts and will allow Avianca to renew its focus on core markets upon emergence from its court-supervised reorganisation.”

3Sixty has been inflight retail partner for Avianca Holdings since 2013.

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