The Avianca Holdings group announced last night that it had taken refuge against creditors in the face of the impact of the Covid-19 pandemic. With the hope of relaunching once his financial problems are resolved.
Based at Bogota-El Dorado Airport, the Colombian company suspended all flights at the end of March; on May 10, 2020, she applied to a New York court to be brought under Chapter 11 bankruptcy protection law. Its press release specifies that Avianca « and some of its subsidiaries and associates » is thus seeking to « preserve and reorganize the group’s activities »: the request was made necessary by « the unpredictable impact of the pandemic », which led to a drop 90% of global passenger traffic and « is expected to reduce industry revenues worldwide by $ 314 billion, according to IATA. » Since mid-March, scheduled flights and its 142 aircraft have been grounded, « reducing consolidated revenue by more than 80% and putting significant pressure on its cash reserves. » LifeMiles, the group’s loyalty program, is administered by a separate company and is not part of the Chapter 11 action.
Read Also: 300 Air New Zealand pilots lose their job
Avianca has already planned to put 12,000 of its 20,000 employees on leave without pay for periods ranging from one to six months. It posted a net loss of $ 894 million last year, compared to a profit of $ 1.1 million in 2018.
The group also plans to « continue to reimburse tickets and honor travel coupons and payments or credits associated with baggage or service claims, in accordance with its current policies. » Given the impact of COVID-19 on travel plans, Avianca will continue to waive modification fees and other penalties associated with changes to customers’ travel plans for airline tickets purchased until October 31, 2020.
Hoy hemos anunciado nuestra intención voluntaria de reorganización en los Estados Unidos de América para preservar y fortalecer nuestros negocios para el futuro. Para conocer más: https://t.co/gH1MovmFPu. Avianca #SeguiráVolando pic.twitter.com/z28xk5VQnI
— Avianca Airlines North America (@AviancaNAM) May 10, 2020
With this measure, the Star Alliance company intends to « protect and preserve operations » so that Avianca can continue to serve its customers « according to the strictest biosecurity protocols »; ensuring connectivity and « stimulating investment and tourism » by continuing to be the flagship of Colombia where it represents more than 50% of the domestic market, and providing non-stop services across South America, North America and European markets (freight traffic continues); and « restructure the balance sheet and the obligations of the Company » to enable it to deal exhaustively with liabilities, leases, aircraft on order and « other commitments ».
According to CEO Anko van der Werff, Avianca “is facing the most difficult crisis in our centenary history (…). Despite the positive results of our Avianca 2021 plan, we believe that in the face of a complete landing of our fleet of passenger aircraft and recovery which will be gradual, entering this process is a necessary step to meet our financial challenges. When government restrictions on air travel are lifted and we are able to gradually resume operations, we look forward to welcoming our employees on leave and playing a role in the economic recovery in Colombia and in our other key markets ”.
En el momento que podamos abrir nuestras alas nuevamente, nuestros protocolos de bioseguridad estarán enfocados en ti porque tu seguridad #SeguiráVolando. ¡Nuestro compromiso es y será protegerte! pic.twitter.com/3B9F2IDaSq
— Avianca Airlines North America (@AviancaNAM) May 9, 2020
The director also recalled that like « many other airlines in the world, including the United States, the European Union, Asia, and Latin America », Avianca is seeking financial support governments of countries where it provides “essential services”.
Avianca Holdings handled 30.5 million passengers in 2019, to and from 76 destinations in 27 countries. Holdings, a subsidiary of Synergy Group, is based in Panama, with subsidiaries in Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Nicaragua, Peru, and El Salvador.