Bermuda Post

Wednesday, Sep 23, 2020

Avianca files for bankruptcy in the US due to the COVID-19 crisis

Avianca files for bankruptcy in the US due to the COVID-19 crisis

Colombian airline Avianca announced on Sunday 10 May that it is filing for bankruptcy in the United States to start a reorganization process due to the speed and dramatic escalation of the impact of the COVID-19 crisis.
"Avianca Holdings and some of its subsidiaries and affiliates today requested to voluntarily file for Chapter 11 of the United States Bankruptcy Code in the Bankruptcy Court of the Southern District of New York, in order to preserve and reorganize Avianca's business," The company said in a statement.

The Colombian-flagged airline, which has been on the ground since March 23 due to the government-ordered flight ban, added that "accepting this process was necessary due to the unpredictable impact of the COVID-19 pandemic, which has caused a 90% decrease in world passenger traffic".

"LifeMiles, a company that administers the program of the same name, is not part of the Chapter 11 application", Avianca Holdings said.

The company, which turned 100 years old last December, added that the shutdown of its regular passenger operations has reduced its consolidated revenues by more than 80% and "has put significant pressure on its liquidity".

THE WORST CRISIS IN A CENTURY

"The effects of the COVID-19 pandemic have led us to face the most challenging crisis in our 100-year history as a company," said Avianca Holdings chief executive Anko van der Werff, quoted in the statement.

Van der Werff noted that despite Avianca Holdings' successful debt restructuring last year, filing for bankruptcy is a necessary step "to meet our financial challenges" as the sector's recovery will be gradual.

"When the government-imposed restrictions on air travel are lifted and we can gradually resume our passenger flights, we hope to contribute to the revival of the economy in Colombia and in our other key markets and to reinstate our employees," added Van der Werff.

THE GOAL IS TO KEEP FLYING

Avianca Holdings assured that by filing for bankruptcy, it seeks to "protect and preserve operations to continue serving clients with safe and reliable air travel, under the strictest biosafety protocols, as the travel restrictions generated are gradually lifted. by COVID-19".

It also aims to "ensure connectivity and boost investment and tourism by continuing to be the main airline in Colombia, serving more than 50% of the domestic market in the country and an essential service without stops" in South America, North America and European markets.

With this measure, it also seeks to "preserve jobs in Colombia and other markets in which it operates", as well as "restructure the balance sheet and the company's obligations".

Avianca Holdings generates more than 21,000 direct and indirect jobs throughout Latin America, of which more than 14,000 are in Colombia, and works with a network of more than 3,000 suppliers, the company added.

The conglomerate consists of airlines Avianca and Tampa Cargo (Colombia), Aerogal (Ecuador) and the companies of the Taca Internacional Airlines Group based in Central America and Peru.

Another reason announced by the company is that the coronavius pandemic has caused a 90% decrease in global passenger traffic and is expected to reduce industry revenues worldwide by $ 314 billion, according to the Association of International Air Transport (IATA).
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