Avianca reaches an agreement to apply its restructuring plan

This Tuesday the Avianca airline indicated that a Court of the Southern District of New York, United States, confirmed the reorganization plan presented by the company in order to stabilize financially.

One of the industries hardest hit by the coronavirus pandemic is aviation, which is looking for a way to reactivate itself with decreased occupancy percentages.

Transform or disappear. That is the slogan that he plans in Latin American airlines, forced by the pandemic to a process of change that includes reduction of routes, signing of alliances, recovery of liquidity and tireless search for customer loyalty.

Among the airlines in trouble are several Latin American airlines such as Avianca – one of the largest in the region – which was forced to apply for help through Chapter 11 of the United States Bankruptcy Code. But why do they do it in this country? The goal is to protect yourself while you put together a plan to overcome this crisis. Both did so before the middle of last year, in the worst of the coronavirus pandemic.

Now “with Avianca’s exit from Chapter 11, the Company will have a solid balance sheet, with significantly less debt and more than USD1 billion of liquidity. The restructuring will allow you to continue repositioning and simplifying your business, reestablishing Avianca as the first option for its customers with more competitive prices, new and modern seats, an increasing network of routes to national and international destinations, the most efficient refinancing of its aircraft. and obtaining the financing of its long-term obligations. Under this vision, the airline will maintain its differentiating and competitive attributes, which include one of the most robust networks in Latin America (and the largest in Colombia), one of the best loyalty programs, its VIP lounges, exclusive services for its customers. and one of the best air cargo networks in the region, “the company said in a statement.

Chapter 11 offers financial relief and debt reorganization without the business being liquidated or operations paralyzed. Which is why in the past many large companies in different areas – from banks to automotive – have done the same to save themselves from closing and being liquidated by their creditors. When a company’s application is accepted, its economic operations and reorganization are supervised by a United States court. Aviation giants such as American Airlines, Delta and United also used this process before.

This option can be requested by companies that operate and are domiciled in the United States and that are not in a position to comply with their obligations. The justice appoints one or more committees to represent creditors, shareholders and the company to put together a plan that allows them to stabilize their finances. In the end, the plan must be approved by the same creditors, shareholders, bondholders and by the court that is handling the case. If there is no agreement, it goes to liquidation under Chapter 7, but this does not happen as often.

According to Avianca, the new business plan will allow it to: Be a stable and economically viable airline, have a more robust route network with a passenger fleet of more than 130 aircraft to serve 2025 more than 200 point-to-point routes in Latin America , as travel demand fully recovers; strengthen a lower cost structure and grow in new markets, promote the continuous growth of cargo businesses and its LifeMiles loyalty program in the markets where it already operates.

Avianca is the second oldest airline in the world that remains in operation. (I)