Colombia’s national carrier, Avianca, has filed for Chapter 11 bankruptcy in the US Southern District of New York. The coronavirus pandemic has seen the airline suspend its international flights since mid-March, reducing its consolidated revenue by over 80% and placing significant pressure on its cash reserves,
The filing for bankruptcy postpones a company’s obligations to its creditors, giving it time to reorganize its debts or sell parts of the business.
According to the airline, it will restructure its roughly $5.3 billion in debt and lease obligations while positioning itself to begin operations as government-imposed travel restrictions are gradually eased.
Meanwhile, the airline will cover expenses with cash on hand and revenue generated from ongoing cargo operations.
In addition to pursuing bankruptcy protection, the company is also planning to shut down its business in Peru to cut costs and “renew its focus on core markets.”
Already, several airlines have either asked for state bailouts, are laying off staff, or have entered into voluntary administration. Examples are:
- •South African Airways: Plans to lay off all its staff
- •Norwegian Air: To lay off about 4700 pilots and crew
- •British Airways: To lay off 12,000 staff
- •Virgin Australia: Entered voluntary administration
- •Flybe: Entered into administration
- •Air Mauritius: Entered voluntary administration
In March this year, the International Air Transport Association (IATA) reported that airlines worldwide would need $200 billion (KSh20.8 trillion) capital injection for them to remain afloat in this COVID-19 pandemic. At the time, 75% of the airlines only had cash to cover three months of their fixed expenses.
Avianca is the flag carrier of Colombia, with its headquarters in Bogotá, D.C., and its main hub is at El Dorado International Airport. It is the largest airline in Colombia and the second largest in Latin America after the LATAM of Chile. It is also the world’s second-oldest extant airline after KLM, having been around for 100 years as of December 2019.
Avianca directly employs 21,000 people throughout Latin America, including more than 14,000 in Colombia.
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