Avianca Holdings says it filed for Chapter 11 bankruptcy protection in the Southern District of New York on Sunday, May 10, citing the "unforeseeable" impact of the COVID-19 pandemic. A corresponding suspension of scheduled passenger operations as of March has eroded the firm's consolidated revenue by over 80% and placed significant pressure on its cash reserves especially given a USD65 million bond payment that was due on May 10.

A total of 39 companies were listed in the application, namely:

  1. Aero Transporte de Carga Unión, S.A. de C.V. t/a AeroUnion (6R, México City Int'l);
  2. Aeroinversiones de Honduras, S.A.;
  3. Aerovías del Continente Americano S.A. t/a Avianca Airlines (AV, Bogotá);
  4. Airlease Holdings One Ltd.;
  5. America Central (Canada) Corp.;
  6. America Central Corp.;
  7. AV International Holdco S.A.;
  8. AV International Holdings S.A.;
  9. AV International Investments S.A.;
  10. AV International Ventures S.A.;
  11. AV Investments One Colombia S.A.S.;
  12. AV Investments Two Colombia S.A.S.;
  13. AV Taca International Holdco S.A.;
  14. Avianca Costa Rica S.A. t/a Avianca Airlines Costa Rica (LR, San José Juan Santamaría);
  15. Avianca Holdings S.A;
  16. Avianca Leasing, LLC;
  17. Avianca, Inc.;
  18. Avianca Ecuador S.A. t/a Avianca Airlines Ecuador (2K, Quito Int'l);
  19. Aviaservicios, S.A;
  20. Aviateca Guatemala, S.A.;
  21. Avifreight Holding Mexico, S.A.P.I. de C.V.;
  22. C.R. Int' l Enterprises, Inc.;
  23. Grupo Taca Holdings Limited;
  24. International Trade Marks Agency Inc.;
  25. Inversiones del Caribe, S.A.;
  26. Isleña de Inversiones, S.A. de C.V. t/a Isleña Airlines (ISV, La Ceiba);
  27. Latin Airways Corp.;
  28. Latin Logistics, LLC;
  29. Nicaraguense de Aviación, Sociedad Anónima (NICA (Nicaragua), S.A.)
  30. Regional Express Américas S.A.S. t/a Avianca Express (EX, Bogotá);
  31. Ronair N.V.;
  32. Servicio Terrestre, Aereo y Rampa S.A.
  33. Servicios Aeroportuarios Integrados SAI S.A.S.
  34. Taca de Honduras, S.A. de C.V.;
  35. Taca de México, S.A.;
  36. TACA International Airlines S.A.;
  37. Taca S.A.;
  38. Tampa Cargo S.A.S. t/a TAMPA Cargo (QT, Medellín José Maria Córdova);
  39. Technical and Training Services, S.A. de C.V.

As it stands, Avianca Holdings will use Chapter 11 to preserve and reorganise its businesses as well as restructure its balance sheet and obligations, said to stand at between USD1-10 billion, to enable it to navigate the COVID-19 pandemic as well as to comprehensively address liabilities, leases, aircraft orders and other commitments. Its LifeMiles loyalty program, which is administered through a separate company, is not part of the Chapter 11 filing.

"Avianca is facing the most challenging crisis in our 100-year history as we navigate the effects of the COVID-19 pandemic," Anko van der Werff, Chief Executive Officer of Avianca, said. "Despite the positive results yielded by our 'Avianca 2021' plan, we believe that, in the face of a complete grounding of our passenger fleet and a recovery that will be gradual, entering into this process is a necessary step to address our financial challenges."

Major creditors holding secured claims include:

  • Wilmington Savings Fund Society, FSB owed USD484.4 million in bonds;
  • UMB Bank, N.A owed USD325 million in longterm debt;
  • Wells Fargo Bank Northwest N.A. owed USD271 million in aircraft loans;
  • ING Capital LLC US owed USD123.56 million in ECA aircraft loans;
  • Banco De Bogota New York Agency owed USD107.25 million in longterm debt.

In the meantime, Avianca is seeking financial support from the governments of the countries where it provides essential services.

"Avianca continues to be engaged in discussions with the government of Colombia, as well as those of its other key markets, regarding financing structures that would provide additional liquidity through the Chapter 11 process and play a vital role in ensuring that the Company emerges from its court-supervised reorganisation as a highly competitive and successful carrier in the Americas," it said.

While those discussions are ongoing, Avianca Holdings will rely on its cash on hand, combined with funds generated from its ongoing operations (such as cargo), during the court-supervised reorganisation process.

As part of downsizing and other cuts, the holding said that it intends to wind-down its Avianca Airlines Perú (Lima Int'l) subsidiary to focus on core markets upon emergence from its court-supervised reorganisation. According to ch-aviation capacities, Avianca's second and third most prominent home markets after Colombia are El Salvador and Ecuador, both ahead of Peru.

Avianca Airlines (AV, Bogotá) and its affiliated carriers will continue to operate for the duration of Chapter 11 proceedings.