Avianca, one of Latin America’s largest airlines, filed for bankruptcy

Avianca, one of Latin America's largest airlines, filed for bankruptcy
Colombian airline Avianca (AVH) filed Chapter 11 of bankruptcy in the southern United States district of New York on Sunday, blaming its collapse for “the unpredictable impact of the Covid-19 pandemic,” according to a company statement.
Avianca, founded in 1919, claims to be the second oldest airline in the world with continuous service. At the end of last year, it was the third largest airline in Latin America based on market share, after that of Chile LATAM Airlines (LTM) and Brazil GOL Linhas AĆ©reas (GOL), according to Euromonitor.
The courier is also part of the Star Alliance, the industrial group that includes other big players like Lufthansa (DLAKY) and Singapore Airlines. Last year, an affiliate holding company United Airlines (UAL) has purchased a majority stake in Avianca.

Avianca is the last major airline to succumb to the loss of business due to the pandemic, which has caused carriers to wrest their flight schedules, ground planes and put staff on unpaid leave.

Last month, Virgin Australia collapsed after failing to secure a government bailout. In March, the British airline Flybe went into administration, saying that its financial challenges were too great to resist in the context of the pandemic.

The Colombian courier said it has been hit hard by the blockades around the world with the worsening pandemic. Of the countries where Avianca currently operates, 88% are subject to total or partial travel restrictions, according to the company.

The decision to file for bankruptcy was made with the intention of “protecting and preserving operations” as the epidemic continues. Avianca directly employs 21,000 people across Latin America, including over 14,000 in Colombia, where it serves as the country’s national carrier.

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In addition to pursuing bankruptcy protection, the company plans to close its business in Peru to reduce costs and “renew its focus on key markets”.

“Avianca is facing the most challenging crisis in our century-old history as we face the effects of the Covid-19 pandemic,” said CEO Anko van der Werff in a statement. “We believe that a reorganization under Chapter 11 is the best way forward to protect the essential air transport and air transport services we offer in Colombia and other markets across Latin America.”

The airline says it usually has 189 planes in its fleet, which operate around 700 flights per day. But this year, its passenger flights have been grounded since mid-March, “reducing consolidated revenue by more than 80% and putting significant pressure on its cash reserves,” he added Monday.

Analysts note that the airline was already struggling last year. Last summer, Avianca was “in a period of upheaval,” wrote the Sydney Center for Aviation in a research relationship.

The airline “was battling negative ratings, undergoing a sudden change in board control and appointing a new CEO after its previous CEO abruptly left the airline,” they added.

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