In 2020, Avianca Holdings, the second-largest South American carrier, posted a net loss of US$1.904 billion due to the impact of the COVID-19 pandemic in the region. The company was forced to start a bankruptcy process in the US, under Chapter 11, but expects to exit it in the second half of this year. Let’s investigate further.
How was 2020 for Avianca?
In a nutshell, 2020 was awful for Avianca. The airline started the year with high hopes after restarting with new management under Anko van der Werff’s command. In 2019, the Colombian airline went under a deep reorganization process. On January 29, 2020, Anko van der Werff optimistically said,
“The company’s financial situation has turned 180 degrees. We have much more certainty about the future; we are looking forward with a lot of optimism, and the numbers are much better.”
Then, the COVID-19 pandemic became a reality no one expected. Colombia shut down the air travel industry for five months, leaving many scratching their heads. Avianca carried 7.9 million passengers in 2020, a decrease of 74% compared to the previous year.
Between April and August, the Colombian carrier was all but grounded. To put a number on the crisis, in April, Avianca only carried 160 passengers, according to its stats! Remember, this is an airline that has over 100 planes and operates domestic flights in three South American countries (Colombia, Ecuador, and El Salvador). Plus, it also flew in Perú but has ceased operations there since.
Therefore, the airline was expecting a heavy toll on its finances. Avianca posted a net loss of US$1.904 billion in 2020, after an US$894 million net loss the year prior.
Turn the page onto the new year
Despite the awful financial results, Avianca is already moving forward. The airline is having an okayish recovery from the COVID-19 pandemic, thanks to Colombia. This country is recovering the number of passengers it had pre-pandemic much faster than its neighbors.
In January, the airline carried 767,000 passengers, the most significant number of travelers it had since March of last year. It also had almost resumed 100 routes throughout its network.
Nevertheless, by March, things had changed a bit. Travel restrictions forced Avianca to suspend 25 international routes.
As a result of the financial outcome in 2020, Avianca recently announced that it most likely won’t pay dividends to shareholders this year. The carrier will have a shareholder meeting this week to discuss that possibility.
An update on Chapter 11
Avianca was the first Latin American carrier to start a Chapter 11 bankruptcy process last year. LATAM Airlines Group and Grupo Aeroméxico swiftly followed.
During this process, Avianca got access to a DIP Financing of US$2 billion to allow the rebuilding of the company.
Currently, the airline is working on its reorganization plan. Avianca should introduce this plan to shareholders and the US court later on in the year and could exit the Chapter 11 process by the second half of 2021.
According to Anko van der Werff, Avianca finished 2020 with the liquidity of US$911 million.
