(TAN): On May 10, 2020, Avianca Holdings S.A. and certain of its subsidiaries and affiliates filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York to preserve and reorganize Avianca’s businesses as the Company continues to navigate the impact of the COVID-19 pandemic.
The filing was necessitated by the unforeseeable impact of the COVID-19 pandemic, which has resulted in a 90% decline in global passenger traffic and is expected to reduce industry revenues worldwide by USD 314 billion, according to the International Air Transport Association.
Avianca’s scheduled passenger operations have been grounded since mid-March, reducing its consolidated revenue by over 80% and placing significant pressure on its cash reserves.
Through the Chapter 11 reorganization process, Avianca intends to:
- Protect and preserve operations so Avianca can continue to operate and serve customers with safe and reliable air travel and high-quality service, under the strictest biosafety protocols, as COVID-19 travel restrictions are gradually lifted;
- Ensure connectivity and drive investment and tourism by continuing as Colombia’s flagship airline, serving over 50% of the domestic market in Colombia and providing essential non-stop service across South America, North America and European markets as well as continuing cargo operations, playing a key role in the economic recovery of Colombia and the Company’s other core markets following the COVID-19 pandemic;
- Preserve jobs in Colombia and other markets where the Company operates, with Avianca directly responsible for more than 21,000 jobs throughout Latin America, including more than 14,000 in Colombia, and working with more than 3,000 vendors; and
- Restructure the Company’s balance sheet and obligations to enable Avianca to navigate the effects of the COVID-19 pandemic as well as comprehensively address liabilities, leases, aircraft orders and other commitments.
“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, Chief Executive Officer 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.”
Avianca continues to be engaged in discussions with the government of Colombia, as well as those of its other key markets, regarding financing structures that would provide additional liquidity through the Chapter 11 process and play a vital role in ensuring that the Company emerges from its court-supervised reorganization as a highly competitive and successful carrier in the Americas.
In the interim, while these discussions are ongoing, the Company intends to utilize its cash on hand, combined with funds generated from its ongoing operations (such as cargo), to support the business during the court-supervised reorganization process.
Mr. Van der Werff added, “We believe that a reorganization under Chapter 11 is the best path forward to protect the essential air travel and air transport services that we provide across Colombia and other markets throughout Latin America. Avianca has operated for more than 100 years – only the second airline in the world to achieve this milestone. 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.”
The Company has requested authority to pay certain prepetition employee wages, compensation and benefit obligations owed from before the filing date, as well as a request to continue paying wages and honoring employee benefit programs in normal day-to-day operations.
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Avianca has also filed motions to maintain its network and customer programs throughout this process and customers can expect to continue to arrange travel and fly with Avianca in the same way they always have. Customers can expect to use tickets, vouchers and gift cards purchased before Avianca initiated this process.
Given the impact COVID-19 has had on travel plans, Avianca will continue to waive
change fees and other penalties associated with changes to customers’ travel plans for tickets purchased until October 31, 2020. When COVID-19 travel restrictions are lifted, Avianca plans to resume passenger flights with the strictest biosafety protocols.
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