Photo: Avianca.
The wait is over; today, Avianca exits Chapter 11. The South American carrier announced it has successfully achieved agreements with its creditors, raised fresh investments of US$1.7 billion, and obtained approval for its plan of reorganization. Avianca will emerge “with a solid balance sheet, significantly reduced debt, and over US$1 billion in liquidity.”
This is the second time Avianca successfully exits from a Chapter 11 bankruptcy process. The company announced on December 1 it has completed its financial restructuring process. Now, Avianca has a new business model that allows a more flexible product tailored to each passenger’s needs and more accessible pricing. Nonetheless, the airline promises to retain its leading network, frequencies, loyalty program, and cargo operations in the region.
Adrian Neuhauser, President and Chief Executive Officer of Avianca, said:
“We look forward to the Company’s future success as we continue building upon Avianca’s rich history across Latin America and internationally. We appreciate the support of our loyal customers, partners, and lenders throughout this process. I would also like to thank our dedicated employees for their commitment to providing uninterrupted service to our customers and whose hard work enabled us to complete this process efficiently. I am confident that we are well-positioned to be a highly competitive and successful carrier.”
How will the new Avianca look?
The company is looking to adjust its products and services to the needs of its customers. It has also reduced unitary costs and taken some initiatives to compete better against low-cost carriers in the region. For example, it is up-gauging its Airbus A320 fleet.
Therefore, Avianca is focusing on offering competitive prices, one of the strongest networks in Latin America, more seats, a simplified fleet for long-haul flights (Boeing 787), and taking Avianca Cargo to a new level as a strategic business for the company.
Avianca will also remain a Star Alliance Member and keep its LifeMiles frequent flyer program while enhancing its services, such as online customer service.
Point-to-point
The low-cost boom is a genuine concern for Avianca. The airline discussed the growth of the low-cost model in Latin America in its Disclosure Statement. Therefore, it is not a surprise to see Avianca changing its business model to better adapt to this new trend.
Over the next three years, Avianca expects to nearly double its network. It will have nearly 200 routes in Latin America and abroad. The majority of the new routes will be point-to-point, providing greater convenience, said Avianca in a statement.
Avianca’s network will be served by a fleet of more than 130 aircraft by the end of 2025. It will have reconfigured, lighter-weight new generation seats, which will allow Avianca to reduce the carbon footprint of its operations and contribute to lowering airport congestions while increasing its efficiency, the airline added.
Avianca is the first of the three Latin American airlines in Latin America to emerge from Chapter 11 proceedings. Aeromexico recently uploaded a modified disclosure statement, and it is set to have a hearing on the subject on December 6. Meanwhile, LATAM recently filed its Reorganization Plan and plans to emerge from Chapter 11 during 2022’s first half.
Roberto Kriete, Chairman of the Board at Avianca, added:
“While we are on the right path to recovery, we must remain cautious with the progress of the pandemic that has not yet ended and must stay focused on executing our new business plan. I have all the confidence that with the support of our investors, of all those who believed in us and with the current administration, this company will grow to continue connecting Latin America”.
