Colombia’s Avianca — the second-largest airline in Latin America — filed for Chapter 11 bankruptcy in the US on Sunday, saying coronavirus has presented it with the biggest challenge in its century-long history.
In a filing to a bankruptcy court in New York, it said the measure was needed to ensure Avianca can “emerge as a better, more efficient airline that operates for many more years”.
“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, the chief executive. “Entering into this process is a necessary step to address our financial challenges.”
Avianca is second in size only to Chile’s Latam in Latin America and is the second-oldest airline in the world behind Dutch carrier KLM. It began life in the Colombian city of Barranquilla in 1919, just 16 years after the Wright brothers’ historic first flight.
It carried over 30m passengers last year to 76 destinations in 27 countries in the Americas and Europe. It generated revenue of $4.6bn in 2019 and employed 21,000 people, most of whom have been furloughed due to coronavirus.
Avianca said its consolidated revenue has fallen by over 80 per cent since its flights were grounded in mid-March.
The New York-listed airline has had financial problems for years, and survived bankruptcy proceedings in the early 2000s. Last year, longtime owner and entrepreneur Germán Efromovich was pushed out in a boardroom coup and the company is now in the hands of Kingsland Holdings, in turn controlled by United Airlines.
A new board announced a major reprofiling of the company’s debt and Avianca celebrated its 100th birthday last November saying it was back on track and ready to fly for another century.
Since the pandemic hit, Mr van der Werff has been campaigning for government help, saying the airline needs a state loan — not a full bailout — but that has not been forthcoming. Avianca had faced a $65m debt repayment this weekend.
Colombia, where Avianca has over 50 per cent market share, has imposed strict lockdown measures to combat coronavirus, including a halt to all international and domestic flights until at least the end of this month. Avianca says 88 per cent of the countries in which it operates have imposed either total or partial air transport restrictions.
Airlines around the world have been slammed by coronavirus, which has prompted a 90 per cent fall in global air travel, according to the International Air Transport Association. It says it expects industry revenues worldwide to drop by $314bn this year.