Avianca Boeing 787-8
Taken by Ricardo Mungarro Fernandez @mx_spotter on IG
On the 10th of May, Avianca's parent company, Avianca Holdings, filed for Chapter 11 bankruptcy in the Southern District of New York, US. What does this mean for the airline? This will protect the company from their creditors, give them more time to pay back their debts and allow them to fix as much as Avianca's business as possible. This is all because of the decreasing demand for air travel due to the Covid-19 outbreak. This has imposed many travel restrictions and lockdowns across the world which results in demand plummeting for airlines.
What Now? Well, Avianca plans on reorganising the airline through a court supervised process. They will set out a plan for Avianca so that they can continue to operate cargo flights while they organise. They also plan on maintaining essential services to South America, North America and to Europe along with their cargo routes. The loss of Avianca to South America would be catastrophic. It is one of the largest airlines on the continent and they have a significant market share of 50% in Colombia alone. It would also cut off many routes connecting Europe and Latin America.
Avianca has a workforce of over 21,000 people with 14,000 of these workers based in Colombia. They also work with over 3,000 suppliers. With these proceeding in place, the airline will most definitely be able to preserve some of these jobs in Latin America. However, with the restructering of the company, Avianca will be continuing to seek financial aid from the Colombian Government. Therefore, it is unknown what will happen with the workforce in the future. Also, LifeMiles program is not part of Avianca's bankruptcy proceedings.
Since Avianca is one of the world's largest airlines to enter into bankruptcy reorganisation procedure, if it doesn't make it through this crisis, it will represent one of the most disastrous airline failures in recent history. If they do succeed, it is likely the airline will emerge as a smaller airline, only operating the most profitable routes. Older aircraft may be retired while those that are leased may return to their lessors. There is going to be major hits to the airline if it does succeed, however, since this is one of the largest airline's going into bankruptcy it may turn into a case study to learn how to deal with this problem effectively in the future. Other airlines might actually wait their examining proceedings out until Avianca has finished theirs.
It would also be a major blow to lose this airline because the carrier is one of the oldest operating airline's in the world dating back to initial operations in 1919! They were under the name SCADTA and had their first flights from Barranquilla to Puerto Berrio in September 1920. Moving 90 years in the future, they decided to merge with TACA in 2009 which resulted in the creation of Avianca's El Salvador arm. Before this crisis, they were the strongest carrier in Colombia and in El Salvador. Unfortunately, in 2019, they were hit with unbelievable costs and the failure of Avianca Brazil. It is uncertain what future Avianca has. For now, we need to wait and see how the examining bankruptcy process plays out for them.
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