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Avianca, the second largest airline in Latin America, files for bankruptcy

May 11, 2020

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Avianca, the second largest airline in Latin America, files for bankruptcyAvianca, the second largest airline in Latin America, files for bankruptcy

The Colombian Avianca Holdings, the second largest airline in Latin America, filed for bankruptcy on Sunday as the payment deadline approached and government requests for help to overcome the coronavirus crisis were unsuccessful.

The airline applied for Chapter 11 in the United States after the COVID-19 pandemic forced it to stop passenger services in mid-March, reducing consolidated sales by more than 80%.

If you don’t get out of bankruptcy, Avianca would be one of the first major players in the industry worldwide to fall due to the pandemic This has resulted in a 90% decrease in global passenger traffic, which would result in a $ 314 billion reduction in sector revenue International Air Transport Association (IATA).

Avianca estimated the liabilities on filing with the United States Bankruptcy Court for the southern district of New York at $ 1 to $ 10 billion.

According to the airline, the process is said to promote business continuity, maintain jobs, maintain connectivity for the company’s more than 30 million passengers a year, and promote economic recovery in Colombia and its other key markets.

“The impact of the COVID-19 pandemic has presented us with the most difficult crisis in our 100-year history,” said Anko van der Werff, President of Avianca Holdings, in a statement to the Colombian financial regulator.

“We believe that Chapter 11 restructuring is the best way to protect the essential travel and air services that we offer in Colombia and other markets across Latin America,” he added.

In April, Avianca auditors raised “significant doubts” about the company’s ability to continue operating due to the COVID-19 crisis.

Avianca was faced with a $ 65 million bond payment on Sunday that analysts did not believe was possible.

Turbulent story

“This is not a surprise at all, given the situation of the company and the airlines in general, for the measures against COVID-19 was expected, but for a long time the company was heavily in debt even though they tried to restructure their debts last year, ”said Juan David Ballén, chief economist at Casa de Bolsa Brokerage in Bogotá.

“The important thing is that the airline continues to operate, which is the main advantage of getting into Chapter 11 and that its stocks and bonds can continue to be listed on the markets,” he added.

At the end of 2019, Avianca had short-term and long-term debt of 4.9 billion, 20% more than in 2018.

Company executives are planning a press conference at the end of Sunday afternoon.

In parallel with the decision to file Chapter 11, the company announced its intention to reduce its activities in Peru.

United Airlines had taken control of Avianca in May 2019 after Synergy Group Corp – industrialist Germán Efromovich – breached a coverage agreement for a U.S. airline loan of $ 456 million that confirmed its shares as collateral . He then transferred management to minority partner Kingsland.

Avianca, who had already been included in the bankruptcy law in 2003 to renegotiate debt for around $ 269 million, said that like many other airlines around the world, she seeks financial support from the governments of the countries in which she works.

Concerns about Avianca have been raised since last year after Roberto Kriete, president of the airline’s board of directors, said in a meeting with employees in August that the company was bankrupt, alleging that it had been misinterpreted.

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