COVID-19 lockdown: Colombian airline Avianca files for bankruptcy
Bogota/IBNS: Reflecting the trouble faced by the aviation sector owing to lockdown imposed by countries to counter COVID-19 outbreak, Colombia's national airline, Avianca, has filed for bankruptcy protection in a US court.
The aviation major said it filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York to preserve and reorganize Avianca's businesses. LifeMiles, Avianca's loyalty program, is administered by a separate company and is not part of the Chapter 11 filing.
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 $314 billion, according to the International Air Transport Association, Avianca said in a statement.
. 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.
"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 – like many other airlines around the world, including in the United States, the European Union, and Asia as well as in Latin America – is seeking financial support from the governments of the countries where it provides essential services.
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.
Image: Wikimedia Commons
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