Avianca driven to bankruptcy by coronavirus

Avianca, Latin America’s No. 2 airline, filed for bankruptcy on Sunday the 10th May, as a bond payment deadline loomed and after pleas for aid from Colombia’s government to weather the corona virus crisis have so far been unsuccessful. If it fails to come out of bankruptcy, Avianca would be one of the first major carriers worldwide to go under as a result of the pandemic, which has resulted in a 90% decline in global air travel. Avianca has not flown a regularly scheduled passenger flight since late March and most of its 20,000 employees have gone without pay through the crisis.
“Avianca is facing the most challenging crisis in our 100-year history,” Avianca CEO Anko van der Werff said in a press release. While Avianca was already weak before the corona virus outbreak, its bankruptcy filing highlights the challenges for airlines that cannot count on state rescues to avoid bankruptcy restructuring. An Avianca representative told Reuters it is still trying to secure government loans.  Avianca, one of the oldest airlines in the world, estimated liabilities between $1 billion to $10 billion in a filing with the U.S. Bankruptcy Court for the Southern District of New York. It already went through bankruptcy in the early 2000s, from which it was rescued by a Bolivian-born oil entrepreneur, German Efromovich. Efromovich grew the airline aggressively but also saddled the carrier with significant debt. Efromovich was ousted from the airline last year in a board-room coup led by United Airlines Holdings Inc, but he still owns a majority stake in the carrier. United stands to lose up to $700 million in loans related to Avianca.
Efromovich told Reuters on Sunday that he disagreed with the decision to file for bankruptcy and that he was not involved in making it. Avianca’s leadership will host a press conference later on Sunday.

Last month, Avianca’s accounting firm, KPMG, said it had “substantial doubts” about the carrier’s ability to exist a year from now.
Avianca’s shares closed at 88 cents on Friday in New York, from a high of more than $18 in 2014.
Most pressingly, Avianca was facing a $65 million bond payment due on Sunday that analysts did not think the airline was in a position to meet. S&P downgraded the airline to CCC- status in the days leading up to that payment.

Founded by German immigrants in Barranquilla, Colombia, on the 5th December 1919, Avianca, (the second oldest airline in the world behind KLM May 1919,) was originally named SCADTA and operated Junkers F13 aircraft, some of which were equipped with floats. In 1949, SCADTA merged with fellow Colombian airline SACO (Servicio Aéreo Colombiano) and adopted its current name. 

Today, after absorbing several airlines in neighbouring countries, Avianca is one of the largest airline groups in Latin America, with a fleet of 173 aircraft and a network of subsidiaries that spans pretty much the whole continent.

Avianca is the third of Efromovich’s airlines to go through bankruptcy or out of business in recent years. Airlines Avianca Brazil and Avianca Argentina ceased to exist last year due to economic troubles in their markets.





Story sourced from here with additions.
https://www.blogger.com/blogger.g?blogID=3707693617392402779#editor/target=post;postID=4627439401149761156;onPublishedMenu=template;onClosedMenu=template;postNum=0;src=link