Avianca enters bankruptcy due to coronavirus, will remain grounded

May 11, 2020

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South American airline group Avianca has entered bankruptcy citing an 80% decline in revenues due to the coronavirus pandemic.

The Bogotá-based carrier’s bankruptcy is unlikely to affect many travellers as scheduled passenger operations have been suspended since mid-March due to COVID-19.

“Avianca is facing the most challenging crisis in our 100-year history as we navigate the effects of the COVID-19 pandemic”, said Avianca CEO Anko van der Werff, in a statement. “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”.

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Avianca’s loyalty programme LifeMiles is a separate company and not part of the reorganization.

Avianca is the latest major airline name to succumb to the pandemic. Virgin Australia entered voluntary administration, Australia’s equivalent of bankruptcy reorganization, in April. Regional carriers Flybe in the U.K., and Compass Airlines, RavnAir and Trans States Airlines have all shut their doors since the crisis hit.

The International Air Transport Association (IATA) has warned that as many as half of the world’s airlines could collapse or merge with others as a result of the coronavirus crisis. Government aid in some countries, including the U.S. but not Colombia — where Avianca is based — has forestalled the worst impact but many expect a significantly smaller airline industry even after the threat of the virus subsides.

“The situation is extremely fragile as the recession starts to take its toll”, said IATA director general Alexandre de Juniac on 28 April. “We’re not out of the situation at all and airline finances are extremely fragile”.

Related: More than half of global airlines could ‘die’ without aid, says IATA

Avianca is a partner of United Airlines and a member of the Star Alliance. Prior to the crisis, it was working on a four-way immunized partnership with Azul in Brazil, Copa Airlines in Panama and United covering travel between the U.S. and South America. The pact would challenge Delta Air Lines and LATAM Airlines’ planned tie up.

The Colombian airline group has hubs in Bogotá (BOG), Lima (LIM), Quito (UIO) in Ecuador, and San Salvador (SAL) in El Salvador. Avianca operated 144 passenger jets, including 107 Airbus A320 family and 13 Boeing 787 aircraft, at the end of January.

Listed on the New York Stock Exchange, Avianca filed for Chapter 11 bankruptcy restructuring in New York. It plans to file for the comparable restructuring process in Peru as well.

In addition, Avianca is in discussions with the Colombian government over possible aid.

Avianca previously reorganized under Chapter 11 from 2003 to 2004.

Featured image by Alberto Riva/The Points Guy.

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