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Avianca, the second largest airline in Latin America, requested this Sunday file for bankruptcy in the United States to reorganize their debt “due to the unpredictable impact of the pandemic” on their businesses.
In a statement dated in Bogotá, the company indicated that together with “Some of its subsidiaries and affiliates” He asked to “voluntarily file for Chapter 11 Bankruptcy Code” in a New York court.
This application allows organizations with financial difficulties reorganize and restructure debt.
The airline’s operations “have been dramatically affected by the Covid-19 pandemic” and air restrictions imposed by governments, while the company “Continues to have high fixed costs”he added.
Since March Avianca temporarily suspended 100% of its commercial flights before the closure of the skies decreed in Colombia to contain the spread of the new coronavirus, which meant leaving 142 planes on the ground.
This decision has reduced their “consolidated income by more than 80% and has exerted significant pressure“On its liquidity, the firm reported this Sunday.
The airline announced in March that 12,000 of its more than 20,000 employees they would take unpaid leave.
In the statement, the company asked the court for “authorization to fulfill pre-application labor commitments” and “Maintain the compensation scheme applicable to its employees”.
This “is not an insolvency proceeding, Avian’s operationsca will continue during and after the Chapter 11 process“Anko van der Werff, CEO of the company, said later in a video conference.
In Peru, however, the company will enter dissolution and liquidation process, and will have to compensate all its employees, said Renato Covelo, legal vice president at the same event. Peru represented around 5% of the company’s operations.
While in Colombia -where more than 50% of the domestic market dominates-, Ecuador, El Salvador and other countries where it will continue to operate, Avianca will seek to negotiate with governments flexible fiscal conditions, credits “And other financial measures,” added van der Werff.
Financial crisis
Throughout the world, the aviation industry has suffered a hard hit from coronavirus, being directly affected by the confinement and the closing of the borders.
According to the International Air Transport Association (IATA), Latin American airlines they will lose 15,000 million dollars in revenue this year, in the worst crisis in the history of the sector.
In 2003, Avianca had previously filed for Chapter 11 Bankruptcy in the United States.
Colombia’s main airline, the company last year registered a net loss of $ 894 millions vs. 1.1 million profit in 2018.
The company denied bankruptcy after a video was released in which the president of the board of directors, Roberto Kriete, assured that the company was “bankrupt”.
Avianca Holdings – which carried 30.5 million passengers last year, a stable number compared to 2018- vIt also supplied 24 aircraft and reduced from 108 to 88 aircraft. its purchase commitment with the European construction company Airbus.
Avianca Holdings is made up of the airlines Avianca and Tampa Cargo (Colombia), Aerogal (Ecuador) and the companies of the Taca Internacional Airline Group, with headquarters in Central America and Peru.
The new coronavirus has caused at least 280,000 deaths and more than four million infections worldwide since it appeared in December, according to a balance sheet established by AFP based on official sources.
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