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Weekly Report - 14 May 2020 (WR-20-19)

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COLOMBIA | Avianca files for bankruptcy. On 10 May Avianca Holdings, the parent company of Colombia’s flag carrier Avianca, filed for bankruptcy proceedings in the US courts under Chapter 11 of the US bankruptcy code.

Established in 1919, Avianca is the world’s second oldest airline and Latin America’s second largest, carrying over 30m passenger per year. But in a statement Avianca Holdings said that it had to file for bankruptcy due to the “dramatic” impact that the coronavirus (Covid-19) pandemic has had on its global operations.

The firm notes that, as a result of the coronavirus outbreak, there has been a 90% decline in international air travel and that its passenger fleet has been grounded since mid-March after Latin American governments suspended all flights as part of efforts to contain the pandemic. According to the statement, all of this has resulted in the loss of over 80% of the firm’s consolidated revenue placing “significant pressure on its cash reserves”.

Avianca’s CEO, Anko van der Werff, said that the firm aims to use the bankruptcy process to sort out its debts and reorganise its businesses under the auspices of the US judicial system. Van der Werff added that the firm is also seeking financial assistance from the governments of the countries in which it “provides essential services” (Avianca’s subsidiaries are the flag carriers in various Latin American countries); and that it hopes that, after a successful restructuring process, Avianca will continue operating and preserving jobs in all the countries in which it operates (many of Avianca’s 21,000 employees in Latin America have been furloughed). However, the firm has already announced that as part of the restructuring process it will liquidate its Peruvian subsidiary, Avianca Perú.