Avianca Latin America’s 2nd largest airline enters administration

On May 10, 2020, Avianca Holdings, the second-largest airline group in Latin America, filed voluntary petitions under Chapter 11 in New York, the United States. The company states the move was necessary to navigate the negative consequences of the COVID-19 pandemic. This is the second time Avianca (AVHOQ) enters administration in its 100-year history. 

“Avianca (AVHOQ) is facing the most challenging crisis in our 100-year history as we navigate the effects of the COVID-19 pandemic,” Anko van der Werff, Chief Executive Officer of Avianca (AVHOQ) , was cited as saying in the company’s statement. “Despite the positive results yielded by our Avianca (AVHOQ) 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’s (AVHOQ) scheduled passenger operations have been grounded since mid-March 2020. Due to the COVID-19 outbreak, 88% of the countries where Avianca (AVHOQ) operates imposed total or partial passenger air transport restrictions. As a result, the company’s revenues fell by over 80% “placing significant pressure on its cash reserves”.

In response to the crisis, the Columbian airline group has already imposed employee furloughs, temporary wage reductions, reductions in non-essential capital expenditures and temporary deferred payments on long-term leases. 

However, the company’s substantial financial obligations coupled with the obscure outlook of the COVID-19 crisis recovery, “made it necessary for Avianca (AVHOQ) to explore alternatives to reorganize its operations and restructure its debt”.

While Avianca (AVHOQ) plans to continue its operations during the court-supervised reorganization process, this does not apply to its activities in the Peru market. Avianca (AVHOQ) said it would close its Peru operations, as part of the effort to “right-size” and shift focus on core markets. 

Avianca (AVHOQ) is the largest airline in Colombia and El Salvador and the second largest in Latin America. The brand encompasses multiple passenger and cargo airlines under Avianca Holdings umbrella company. Since May 24, 2019, Avianca Holdings is controlled by Kingsland Holdings, an independent third party of United Airlines.

Avianca (AVHOQ) has been flying for 100 years. The company has a fleet of 158 aircraft, employs over 21,000 people, and flies to 76 destinations in 27 countries within the Americas and Europe. In 2019, Avianca Holdings reported $4.6 billion in revenues. 

Avianca (AVHOQ) 2021 plan was announced on February 22, 2019. The corporate transformation plan consists of four key areas of improvement:

  1. the improvement of operational indicators; 
  2. fleet adjustments; 
  3. the optimization of operational profitability;
  4. repositioning of non-strategic assets.

In 2003, Avianca (AVHOQ) already underwent a Chapter 11 process. 

Related Posts

AeroTime is on YouTube

Subscribe to the AeroTime Hub channel for exclusive video content.

Subscribe to AeroTime Hub