Avianca Holdings initiates voluntary reorganization procedure

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Avianca Holdings initiates voluntary reorganization procedure
Mon May 11, 2020

Despite the debt restructuring in 2019 and the execution of its "Avianca 2021" plan until mid-March, the impact of COVID-19 has led the Company to file for Chapter 11 in New York

Avianca Holdings initiates voluntary reorganization procedure
Avianca Holdings initiates voluntary reorganization procedure AIRLINES TRANSPORT Mon 11 May 2020
Despite the debt restructuring in 2019 and the execution of its "Avianca 2021" plan until mid-March, the impact of COVID-19 has led the Company to file for Chapter 11 in New York

By: travel2latam
 @ travel2latam info@travel2latam.comtravel2latam
Avianca Holdings SA and some of its subsidiaries and affiliates today requested to voluntarily file for Chapter 11 of the United States Bankruptcy Code in the Bankruptcy Court of the Southern District of New York, in order to preserve and reorganize Avianca's businesses. LifeMiles ™, the company that administers the program of the same name, is not part of the Chapter 11 application. Taking advantage of this process was necessary due to the unpredictable impact of the COVID-19 pandemic, which has caused a 90% decrease in global traffic passengers and is expected to reduce industry revenues worldwide by $ 314 billion, according to the International Air Transport Association (IATA). Avianca's regular passenger operations have been on the ground since mid-March, which has reduced its consolidated revenues by more than 80% and has put significant pressure on its liquidity.
Through the Chapter 11 reorganization process, Avianca intends to:
-Protect and preserve operations to continue serving customers with safe and reliable air travel, under the strictest biosecurity protocols, as the travel restrictions generated by COVID-19 are gradually lifted.
-Ensure connectivity and boost investment and tourism by continuing to be the main airline in Colombia, serving more than 50% of the domestic market in the country and an essential service nonstop through South America, North America and European markets; as well as continue with cargo operations, playing a key role in the economic recovery of Colombia and the other main markets of the Company after the COVID-19 pandemic.
-Preserve jobs in Colombia and other markets in which the Company operates, Avianca being directly responsible for more than 21,000 direct and indirect jobs throughout Latin America, including more than 14,000 in Colombia, and working with more than 3,000 suppliers.
-Restructure the company's balance sheet and obligations to face the effects of the COVID-19 pandemic, as well as manage its responsibilities, leases, aircraft orders and other commitments.

"The effects of the COVID-19 pandemic have led us to face the most challenging crisis in our 100-year history as a company," said Anko van der Werff, CEO and President of Avianca Holdings. "Despite the positive results of our" Avianca 2021 "plan, we believe that, given the total suspension of our passenger operations and a recovery that will be gradual, entering this process is a necessary step to face our financial challenges" .

“When government-imposed restrictions on air travel are lifted and we can gradually resume our passenger flights, we hope to contribute to the revival of the economy in Colombia and in our other key markets and to reinstate our employees. We greatly appreciate the commitment of our collaborators who have been serving the more than 30 million passengers who fly with us each year. Our purpose continues to be connecting people, families and companies. Our customers can be assured that they will continue to count on Avianca for safe, reliable and high-quality service, and our valued LifeMiles ™ members will be able to continue to earn and redeem their miles just as they always have, "said van der Werff.

Avianca - like many other airlines around the world, including those of the United States, the European Union and Asia, as well as those of Latin America - is seeking financial support from the governments of the countries in which it provides essential services. The Company continues to engage in discussions with the Government of Colombia, as well as the governments of its other key markets, in order to find financing structures that provide additional liquidity under Chapter 11 and that play a vital role in ensuring that the company comes out of its reorganization as a highly competitive and successful airline in the Americas. While these conversations are ongoing, Avianca intends to use its liquidity along with funds generated from its ongoing operations (such as cargo transportation), to support the business during the reorganization process.

Van der Werff added, "We believe that the reorganization under Chapter 11 is the best way forward to protect the essential travel and air transportation services we provide in Colombia and in other markets throughout Latin America. Avianca has operated for more than 100 years, becoming the second airline in the world to achieve this milestone We are confident that through this process we can continue to execute our “Avianca 2021” plan, optimize our capital structure and our aircraft fleet and - with government support - emerge as a better and more efficient airline that will operate for many years to come. "

Measures to protect employees and suppliers
As part of the process, Avianca has filed several requests with the Court to support its reorganization, and the Company expects the court to decide on these requests in the coming days. The Holding has requested authorization to fulfill labor commitments prior to the request, as well as to maintain the compensation scheme applicable to its employees. Avianca has also requested authorization to fulfill various pre-filing obligations that are owed to some of its travel agency partners and suppliers from before the filing date. The Company intends to pay suppliers and partners of travel agencies according to their normal practices, in a timely manner for the goods and services provided as of the filing date and during the Chapter 11 process.

Continue to provide services to clients
Avianca has also submitted requests to maintain its client programs throughout this process; therefore, passengers can trust to continue organizing trips and flying with Avianca in the same way that they always have. Additionally, customers can use tickets, vouchers, and gift vouchers purchased before Avianca began this process. Additionally, they will continue to accumulate miles when they fly with the airline, and will be able to continue redeeming the accumulated miles through LifeMiles ™ to buy tickets with Avianca during this process. Likewise, additional frequent flyer benefits remain active, including access to VIP Lounges, priority check-in, cabin upgrades and others. Avianca also expects to continue issuing ticket refunds and honoring travel bonuses and payments or credits associated with baggage or service claims in accordance with its current policies. Given the impact that COVID-19 has had on travel plans, Avianca will continue to implement its flexibility policy in the face of ticket changes until October 31, 2020.

Similarly, as soon as travel restrictions are lifted, the airline plans to resume its flights under the strictest biosecurity protocols.


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