Avianca Holdings, Latin America’s No. 2 airline, filed for bankruptcy Sunday, as a bond cost deadline loomed and after pleas for help from Colombia’s authorities to climate the Corona Virus disaster have to this point been unsuccessful.
If it fails to return out of bankruptcy, Avianca can be one of many first main carriers worldwide to go underneath because of the pandemic, which has resulted in a 90% decline in world air journey.
Avianca has not flown a often scheduled passenger flight since late March and most of its 20,000 workers have gone with out pay by means of the disaster.
“Avianca is going through essentially the most difficult disaster in our 100-year historical past,” Avianca CEO Anko van der Werff mentioned in a press launch.
While Avianca was already weak earlier than the Corona Virus outbreak, its bankruptcy submitting highlights the challenges for airways that can’t rely on state rescues to keep away from bankruptcy restructuring. An Avianca consultant advised Reuters it’s nonetheless making an attempt to safe authorities loans.
“Help from governments to the airline trade is significant,” Silvia Mosquera, Avianca’s chief industrial officer, mentioned in an announcement to Reuters earlier than the bankruptcy.
Avianca, one of many oldest airways on this planet, estimated liabilities between $1 billion to $10 billion in a submitting with the U.S. Bankruptcy Court for the Southern District of New York.
It already went by means of bankruptcy within the early 2000s, from which it was rescued by a Bolivian-born oil entrepreneur, German Efromovich.
Efromovich grew the airline aggressively but in addition saddled the service with important debt. Efromovich was ousted from the airline final yr in a board-room coup led by United Airlines Holdings Inc, however he nonetheless owns a majority stake within the service.
United stands to lose as much as $700 million in loans associated to Avianca.
Efromovich advised Reuters on Sunday that he disagreed with the choice to file for bankruptcy and that he was not concerned in making it.
Avianca’s management will host a information convention afterward Sunday.
Lead-up to bankruptcy
The administration that took over after Efromovich’s ousting was already targeted on a cost-cutting reorganization dubbed “Avianca 2021.”
Warnings about its fragile funds abounded. Roberto Kriete, president of Avianca’s board, mentioned final yr in a gathering with workers that the airline was “broke.”
Last month, Avianca’s accounting agency, KPMG, mentioned it had “substantial doubts” concerning the service’s means to exist a yr from now.
Avianca’s shares closed at 88 cents on Friday in New York, from a excessive of greater than $18 in 2014.
Most pressingly, Avianca was going through a $65 million bond cost due on Sunday that analysts didn’t suppose the airline was able to satisfy. S&P downgraded the airline to CCC- standing within the days main as much as that cost.
Van der Werff had in latest weeks gone on a public relations marketing campaign to safe emergency help from Colombia’s authorities, however as of Sunday none had materialized.
Avianca has no sure date to renew operations, as its essential hubs – Colombia, El Salvador and Peru – have all shut down air site visitors to combat the Corona Virus. The service confronted backlash this week after it bought airplane tickets for late May solely to must cancel them when Colombia prolonged its Corona Virus lockdown.
In parallel to its Chapter 11 submitting within the United States, Avianca mentioned it intends to start winding down operations in Peru.
Avianca is the third of Efromovich’s airways to undergo bankruptcy or out of enterprise lately. Airlines Avianca Brasil and Avianca Argentina ceased to exist final yr as a result of financial troubles of their markets.