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The Colombian airline can no longer pay its debts. Therefore, it is saved from the protection of creditors. It is a déjà vu for Avianca.
On Sunday, Avianca Holdings’ attorneys visited Bowling Green, a small park in the southern tip of Manhattan. But they did not want to relax there. Right next to it is the United States Bankruptcy Court for the Southern District of New York. And there they applied for creditor protection for their client.
The move was necessary because Avianca would have had to pay off a remaining $ 550 million loan on Sunday (May 10). However, the Colombian airline was unable to raise the necessary $ 65.6 million. That’s why the decision was made to apply for creditor protection, explains CEO Anko van der Werff. “Avianca is going through the most challenging crisis in its 100-year history.”
No more profit
The Covid 19 pandemic made the necessary move, van der Werff said. There are direct or indirect flight restrictions in 88 countries you fly to. As a result, no aircraft had taken off from Avianca since March. Consequently, the airline no longer generates any income.
The airline uses the Chapter 11 creditor protection process, known in the United States, where it is listed, to restructure financially. She also develops a new business plan. At the same time, it continues to negotiate with the Colombian government on state aid.
For the second time in protection of creditors
Chapter 11 is a déjà-vu for Avianca. In 2003, the airline had previously placed itself under the protection of creditors. A year later, she returned financially sound and began expanding in South America. However, it not only brought him success. Avianca was already reorienting itself before the Corona crisis because the impetuous expansion brought losses.
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