Avianca
Reuters Connect

One of the largest airlines in Latin America and the second-longest-running airline in world files bankruptcy in the wake of the global pandemic, according to the recently published article.

The Financial Horizon of Airline Industry

The airline industry has been negatively impacted by COVID-19. Since the pandemic began, travel restrictions were imposed in different countries around the world and forced airline companies to shut down its operation as well.

In a recently published article, Boeing Chief Executive David Calhoun said that a major airline is most likely to go down as a result of the pandemic and it will take three to five years before the industry can recover.

Moreover, Warren Buffet revealed recently that Berkshire had sold its holdings in the airline sector and that includes Delta, American Airlines, and Southwest.

Avianca Holdings Files Bankruptcy in the Wake of Pandemic

Avianca is one of the largest airlines in Latin America and the second-long-running airline in the world that has recently filed bankruptcy under Chapter 11 in the U.S. Southern District of New York on Sunday.

The airline was founded in 1919 and said in its official statement that the decision to file for bankruptcy was made with intention and it is to protect and preserve its operations as the pandemic continues.

Moreover, Avianca employs 21,000 across Latin America and that includes 14,000 in its main station in Colombia. Additionally, Avianca plans also to shut down its operation in Peru tu cut off their expenses.

CEO Anko van der Werff said: "Avianca is facing the most challenging crisis in our 100-year history as we navigate the effects of the Covid-19 pandemic. We believe that a reorganization under Chapter 11 is the best path forward to protect the essential air travel and air transport services that we provide across Colombia and other markets throughout Latin America."

Subsequently, filing bankruptcy under Chapter 11 will allow the company to postpone its responsibility to creditors and giving them enough time to reorganize its debts and if possible to sell some portion of its business.

Normal Operation of Avianca Holdings Before they Were Hit by the Pandemic

According to the airline, typically they conduct about 700 flights in their 89 planes. However, their number of flights has significantly reduced during the first quarter this year due to travel restrictions. The company added that in the middle of March, its consolidated revenue has reduced by over 80 percent.

This is not the first time that the airline struggled financially. The previous chief executive of Aviance abruptly left because of their negative credit ratings and changes on their board. It was also found out that the company was in a period of upheaval since last summer.

Aside from Avianca, there were other airlines around the world declared the same. Virgin Australia has collapsed into administration after the billionaire founder Richard Branson failed a government bailout last month.

The same sudden economic problem also was the reason why UK airline Flybe has collapsed in March and told their customers that it has grounded all flights as it enters administration.