Avianca files for bankruptcy protection

Latin American operator Avianca is voluntarily filing for Chapter 11 bankruptcy protection with a New York court, to give the company time to re-organise its business.

Avianca Holdings said the filing request, with the Southern District of New York bankruptcy court, is “necessary” given the “unpredictable impact” of the coronavirus crisis on its operations.

As part of its recover plan, the carrier will shut down its Peruvian division, and cut back the fleet of other carriers.

Closing the Peruvian operation will allow Avianca to “renew its focus on core markets” once the restructuring is complete.

Avianca Holdings’ bankruptcy protection filings state that a “significant number” of aircraft across its various airline fleets will be surplus to its requirements.

After the initial demand shock and a slow return to service, it says, air travel will stabilise at 20-30% below pre-crisis levels.

Avianca had been operating a 156-jet fleet — including 143 passenger and 13 cargo aircraft — plus 15 turboprops at the end of 2019.

The company said it had started a comprehensive review of the fleet including suitability of individual aircraft to the Bogota hub which, while still under way, is likely to result in its returning excess aircraft to lessors and lenders.

Fourteen aircraft — none of which are freighters – are listed as excess in its initial filing, including a Boeing 787-8 and two Airbus A330-300s operated by Avianca.

The other 11 aircraft are single-aisle jets — seven A320s, two A321s, and two A319s – from the fleets of Avianca, Avianca Ecuador, and Taca.

Avianca is seeking to reject leases, or abandon, the excess aircraft which, it says, will become “burdensome” as it proceeds with its re-organisation.

It said the measure is intended to “preserve” its business. “Avianca will continue to operate and serve our customers during this process,” it stressed.

“We remain steadfast in our commitment to connect individuals, families, and businesses.”

Avianca Holdings is one of 39 companies participating in the joint filing, with others including Avianca Ecuador, Avianca Costa Rica, Tampa Cargo, and Taca International Airlines.

Avianca said it will restructure its balance sheet and obligations to deal with the effects of the crisis and to manage its aircraft orders, leases, and other responsibilities.

“It is important to note that this is not an insolvency or liquidation procedure,” Avianca is assuring its suppliers. “We intend to pay providers in a timely manner for goods and services provided.”

The company added that it is continuing to engage in discussions with the Colombian government over financing structures that would provide additional liquidity through the Chapter 11 process. It said it intends to exit the re-organisation as a “highly-competitive and successful” airline.

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