Avianca Holdings, Latin America’s second largest airline, filed for chapter on Sunday, after failing to fulfill a bond fee deadline, whereas its pleas for coronavirus assist from Colombia’s authorities have thus far been unsuccessful.
If it fails to return out of chapter, Bogota-based Avianca can be one of many first main carriers worldwide to go below because of the pandemic, which has crippled world journey.
Avianca has not flown a often scheduled passenger flight since late March and most of its 20,000 staff have gone with out pay by way of the disaster.
“Avianca is going through essentially the most difficult disaster in our 100-year historical past,” Avianca chief government Anko van der Werff stated in a information launch.
Whereas Avianca was already weak earlier than the coronavirus outbreak, its chapter submitting highlights the challenges for airways that can’t depend on state rescues or on such rescues coming quick sufficient. Avianca continues to be hoping for a authorities bailout.
“This is no surprise in any respect,” stated Juan David Ballen, chief economist at Casa de Bolsa brokerage in Bogota. “The corporate was closely indebted regardless of the actual fact it tried to restructure its debt final yr.”
Avianca, the second oldest frequently working airline on the planet after KLM, had $7.three billion in money owed in 2019. The airline filed for Chapter 11 chapter in New York and stated it might proceed operations whereas it restructured its money owed.
The Colombian Affiliation of Civil Aviators (ACDAC), a union representing many Avianca staff, stated it supported the transfer.
Avianca already went by way of chapter within the early 2000s, from which it was rescued by a Bolivian-born oil businessman, German Efromovich.
Mr Efromovich grew Avianca aggressively but in addition saddled the service with important debt till he was ousted from the airline final yr in a boardroom coup led by United Airways Holdings Inc. He nonetheless owns a majority stake within the service.
United stands to lose as much as $700 million in loans associated to Avianca.
Mr Efromovich informed information company Reuters on Sunday that he disagreed with the choice to file for chapter and that he was not concerned in making it.
Lead-As much as Chapter
The administration that took over after Mr Efromovich’s ousting was already centered on a cost-cutting reorganization dubbed “Avianca 2021” earlier than this yr’s disaster.
Warnings about its fragile funds abounded. Roberto Kriete, president of Avianca’s board, stated final yr in a gathering with staff that the airline was “broke.”
Final month, Avianca’s accounting agency, KPMG, stated it had “substantial doubts” concerning the service’s means to exist a yr from now.
Avianca’s shares closed at 88 cents on Friday in New York, from a excessive of greater than $18 in 2014.
Most pressingly, Avianca was going through a $65 million bond fee due on Sunday that analysts didn’t suppose the airline was ready to fulfill. S&P downgraded the airline to “CCC-” standing within the days main as much as that fee.
Airline executives confirmed in a press name on Sunday night time that that they had not made the fee.
Mr Van der Werff had mounted a public relations marketing campaign in current weeks to safe emergency assist from Colombia’s authorities, however none had materialized as of Sunday.
Avianca has no sure date to renew operations, as its principal hubs – Colombia, El Salvador and Peru – have all shut down air visitors to battle the coronavirus. The service confronted backlash after it offered aircraft tickets for late Could solely to need to cancel them when Colombia prolonged its coronavirus lockdown.
Avianca will even shut down its operations in Peru, which represents 5% of the airline’s income, and can lay off tons of of staff throughout the subsequent 10 days.
“On this time, we shouldn’t have liquidity to maintain a loss-making operation,” Silvia Mosquera, Avianca’s chief business officer, informed reporters concerning Avianca Peru.
Colombia’s Avianca is the third of Mr Efromovich’s airways to undergo chapter or out of enterprise lately. Airways Avianca Brasil and Avianca Argentina ceased to exist final yr due to financial troubles of their markets.