Colombian airline Avianca Holdings files for bankruptcy
Avianca Holdings filed for bankruptcy under Chapter 11 in the United States after the coronavirus pandemic forced it to suspend passenger transportation.
The Colombian airline Avianca Holdings filed for bankruptcy under Chapter 11 in the United States after the coronavirus pandemic forced it to suspend passenger transportation from mid-March, reducing its consolidated revenue by more than 80 percent, the company said Sunday. Avianca, Latin America's second-largest airline, estimated liabilities of between one billion and 10 billion dollars in a filing with the U.S. Bankruptcy Court for the Southern District of New York.
According to the airline, the process is intended to promote continuity of operations, preserve jobs, maintain connectivity for the company's more than 30 million annual passengers and promote economic recovery in Colombia and its other key markets. "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 Anko van der Werff, president of Avianca Holdings, quoted in a statement to the Colombian Financial Superintendence.
"In the face of the total suspension of our passenger operation and a recovery that will be gradual, entering into this process is a necessary step to meet our financial challenges," he added. Avianca has suspended all passenger flights since March due to the coronavirus crisis, after Colombia, El Salvador, Ecuador, and Peru, where its main centers of operations are located, closed air traffic.
Turbulent history
United Airlines had taken control of Avianca in May last year after Synergy Group Corp - of industrialist German Efromovich - breached a hedging agreement for a US$456 million loan from the US airline for which it had endorsed its shares as collateral. United Airlines handed over the management of Avianca to minority partner Kingsland.
Avianca - which in 2003 had already entered bankruptcy law to renegotiate debts of some US$269 million - said that, like many other airlines around the world, it is seeking financial support from the governments of the countries in which it operates. In April, Avianca's financial auditors had warned of "substantial doubts" about the company's ability to continue in business because of the Covid-19 crisis, which is keeping its passenger business paralyzed by quarantine measures to contain the spread of the pandemic.
"We believe that reorganization under Chapter 11 is the best way to go to protect the essential travel and air transportation services we provide in Colombia and other markets throughout Latin America," said Anko van der Werff.
The coronavirus pandemic has caused a 90 percent drop in global passenger traffic and is expected to reduce industry revenues worldwide by $314 billion, Avianca said, citing the International Air Transport Association (IATA). But concerns about Avianca have been raised since last year, after Roberto Kriete, president of the airline's board of directors, said in an August meeting with employees that the airline was bankrupt, after which he said he had been misunderstood.
