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Avianca files for Chapter 11, plans to restructure

Avianca Holdings S.A., along with some of its subsidiaries and affiliates, announced on May 10 that it has voluntary filed for Chapter 11 with the U.S. Bankruptcy Code in the Southern District of New York. Based in Colombia, control of Avianca Holdings was assumed in May 2019 by Kingsland Holdings Limited, described as an independent third party of United Airlines. Avianca’s loyalty program, LifeMiles, is administered by a separate company and is not part of the Chapter 11 filing.

Avianca states that it plans to use the Chapter 11 process to restructure; and that it will continue to operate and serve its customers for the foreseeable future. Avianca describes itself as the largest airline in Colombia and El Salvador; and the second largest in Latin America. Carrying more than 30 million passengers each year, the airline serves more than 50 per cent of its domestic market in Colombia and provides non-stop service across South America, North America and Europe. Avianca is directly responsible for more than 21,000 jobs throughout Latin America, including more than 14,000 in Colombia.

The company, which underwent a Chapter 11 process in back in 2003, points to the COVID-19 pandemic as the reason for its 2020 filing, as well as statistics provided by the International Air Transport Association, indicating the pandemic has created a 90 per cent decline in global passenger traffic with an expectation that worldwide annual revenue for the industry worldwide will see a reduction of US$314 billion. Avianca notes, that from the total number of countries in which it operates, 88 per cent have total or partial passenger air transport restrictions.

“Avianca is facing the most challenging crisis in our 100-year history as we navigate the effects of the COVID-19 pandemic,” said Anko van der Werff, CEO of Avianca. “Despite the positive results yielded by our Avianca 2021 plan, 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.”

Van der Werff notes Avianca is only one of two airlines in the world to have operated for more than 100 years. “We are confident that through this process we can continue to execute our Avianca 2021 plan, optimize our capital structure and fleet of aircrafts and – with government support – emerge as a better, more efficient airline that operates for many more years,” he said.

Through the Avianca 2021 plan, the company redesigned its network with 130 routes to 76 destinations in 27 countries, adding to the launch of a new “branded fares” pricing model in domestic markets in Ecuador and Colombia, including flights to and from Europe.