Avianca starts 2021 with a $311 million net loss due to the impact of the COVID-19 pandemic. During the first quarter of the year, Avianca had total operating net revenues of US$371 million, a 60% drop compared to its pre-pandemic levels.
Looking at Avianca’s finances after $311 million net loss
In 2020, Avianca lost over US$1 billion due to the impact of the pandemic. The airline was hoping for a much better year, though. Actually, in 2020’s first quarter, Avianca had a small net profit of US$3.7 million.
Much has happened since that. Avianca exited the Peruvian market, heavily downsized its operations across the continent, and even lost its CEO, who found a new job at SAS. Anko van der Werff’s substitute is Adrian Neuhauser, who has worked the role of CFO at the company.
This year started with mixed trends. Although Colombia is having the second-best recovery in Latin America (only behind Mexico), Avianca hasn’t capitalized. The airline is still operating 51.2% fewer flights than two years ago, according to Cirium’s database.
Avianca had a nearly equal mix of passenger and cargo revenues during the quarter. It obtained US$199 million from passengers and US$172 million from freighter activities. Meanwhile, its operating expenses totaled US$580 million, which led to an operating loss of US$208 million. All of this led Avianca to start 2021 with a $311 million net loss.
How’s the Chapter 11 bankruptcy process going?
Avianca was the first Latin American carrier to start a Chapter 11 bankruptcy process due to the impact of the COVID-19 pandemic. The Colombian airline started the process on May 10, 2020, over a year ago.
Since then, Avianca has received authorization from the U.S. Bankruptcy Court to access a US$2 billion DIP Funding. This money has allowed the airline to continue operating despite a harsh environment across South America.
According to Avianca’s financial statement, the airline has already received 100% of the DIP Financing. “As of April 30, 2021, the Group received the last disbursement of DIP Financing,” said Avianca.
Going forward, the company expects to emerge from the Chapter 11 process during 2021. As part of this process, Avianca plans to obtain exit financing for US$1.8 billion to refinance US$1.4 billion of obligations related to the DIP Financing. The extra US$400 million will increase the airline’s liquidity.
A look at Avianca’s fleet structure
Since starting the Chapter 11 financial reorganization, Avianca has reduced the size of its fleet. Nevertheless, it has done it in a less aggressive way than other Latin American carriers, like LATAM and Aeroméxico.
On June 11, 2020, Avianca got approval to reject the leases of 12 aircraft. The airline got rid of two A330, two A319, two A320, two A321, and four ATR-72.
Additionally, the airline rejected the leasing contracts of two more A319 planes. Prior to the pandemic, Avianca also rejected the contracts of ten Embraer E190 aircraft.
Therefore, Avianca’s fleet currently is composed of 144 aircraft. It has 23 A319, 55 A320, ten A320neo, 11 A321, two A321neo, seven A330, six A330F, three A300F, 13 Boeing 787-8, one B787-9, two B767F, and 11 ATR-72. We expect Avianca could reject more leasing contracts in the future.