Avianca, the second largest airline in Latin America, filed for Chapter 11 bankruptcy protection in the US on Sunday.
The filing by the Colombian carrier was made in the face of the “unforeseeable impact of the Covid-19 pandemic,” which has resulted in a 90% decline in global passenger traffic and is expected to reduce industry revenues worldwide by $314 billion.
Avianca’s scheduled passenger services have been grounded since mid-March, reducing its consolidated revenue by more than 80% and placing “significant pressure” on its cash reserves.
The Chapter 11 process enables the airline to continue to operate while having time to re-organise its finances through a restructuring of its balance sheet, obligations and liabilities, including leases, aircraft orders and other commitments.
The airline has furloughed almost all of its 21,000 staff with the majority of its 158-strong fleet grounded.
Avianca said it was also seeking financial support from the governments of the countries it serves – like many other airlines around the world, including in the US, EU, Asia and Latin America.
Chief executive Anko Van der Werff said: “Avianca is facing the most challenging crisis in our 100-year history as we navigate the effects of the Covid-19 pandemic.
“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.”
He added: “We believe that a reorganisation 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.
“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, optimise our capital structure and fleet of aircraft and – with government support – emerge as a better, more efficient airline that operates for many more years.”
The ‘Avianca 2021’ plan was initiated last year to revamp the airline’s network with 130 routes to 76 destinations in 27 countries, adding to the launch of a new pricing model in Ecuador and Colombia, including flights to and from Europe. It raised $375 million in new financing earlier this year.
