Avianca Succumbs to Covid-19, Files for Bankruptcy

 - May 11, 2020, 6:37 AM
An Avianca Airbus A320 lands at Toronto Pearson Airport in 2018. (Photo: Flickr: Creative Commons (BY-SA) by BriYYZ)

This story is part of AIN's continuing coverage of the impact of the coronavirus on aviation.

Colombian flag carrier Avianca on Sunday filed for bankruptcy protection in New York District Court, some two months after the country closed its airspace in reaction to the Covid-19 pandemic. The second-largest airline in Latin America, Avianca had begun to see CEO Anko van der Werff’s restructuring efforts yield some semblance of stability until the coronavirus crisis prompted the government to shut down Colombia to air traffic in March.

Following the cancellation of unprofitable routes and the sale of inefficient aircraft and subsidiaries last year, operational gains such as a 10 percent improvement in on-time performance raised hopes that the 100-year-old airline had finally emerged from its malaise. In December the company, whose shares trade on the New York Stock Exchange, took another step toward stability with $375 million in new financing provided by major shareholders United Airlines and Kingsland Holdings, $250 million of which came in the form of a secured convertible loan.

All told, Avianca re-profiled more than $4.5 billion of lease and debt obligations to ensure liquidity. “The Avianca 2021 Plan represents the foundation for Avianca’s future, and we are excited now to have completed this important re-profiling program and to have received funding from United and Kingsland that serves as the cornerstone of our plan,” said van der Werff in a written statement.

Now, as its more than 140 airplanes sit grounded under the Colombian government’s orders, the airline will again need to restructure its balance sheets to emerge from Chapter 11 bankruptcy protection. In a statement issued Sunday, the airline said it remains engaged in talks with the government of Colombia and “those of its other key markets” regarding financing structures that would provide additional liquidity through the Chapter 11 process. “In the interim, while these discussions are ongoing, the company intends to utilize its cash on hand, combined with funds generated from its ongoing operations (such as cargo), to support the business during the court-supervised reorganization process,” it said.  

“We believe that a reorganization 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,” concluded Van der Werff. “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, optimize our capital structure and fleet of aircraft and – with government support – emerge as a better, more efficient airline that operates for many more years.”