Independent auditors KPMG have told Avianca Holdings that “substantial doubt exists” as to the ability of the group to continue as a going concern.
The avianca airlines (AV, Bogotá) parent made the comment in an SEC filing on April 23 explaining why its annual report for the year ending December 31 could not be presented on time. It will file the report, including the auditors' conclusion, in June, it promised.
“Following orders by the governments of Colombia and of other countries in which we operate, we have temporarily ceased international passenger operations to and from Colombia, ceased all Colombian domestic passenger flight operations, and cancelled all passenger flights to and within Peru, El Salvador, and Ecuador,” the filing said.
“The spread of Covid-19 and the government measures taken to address it have already had a material and adverse effect on the airline industry and on us and have resulted in unprecedented revenue and demand drop as well as overall macroeconomic uncertainty,” it continued.
It added that the group at this point “cannot foresee or quantify the extent of the impact” of the coronavirus crisis.
Avianca has forced around half its workforce onto unpaid leave, is appealing for government assistance, and has deferred payments on aircraft leases and loans.
“As a result, we are currently in default under certain of our outstanding indebtedness,” the airline admitted in the filing. “If our operations remain suspended for an extended period, we may have to take further measures to preserve our business.”
Already in a poor state before the current crisis, to keep operating last year it needed a USD250 million loan that was mostly funded by United Airlines (UA, Chicago O'Hare) parent United Airlines Holdings.
In February, Avianca blamed a fourth-quarter net loss of USD894 million on a set of one-off events, mostly debt and leasing renegotiations it said were necessary to put in place its leaner Avianca 2021 plan.
