Latin America’s second-biggest airliner Avianca has filed for bankruptcy, a clear sign that the travel restrictions imposed in response to the Covid-19 pandemic are beginning to take a toll on the region’s businesses.
The news emerges amid reports that several more carriers are seeking a government bailout.
At stake are about 20,000 jobs, mostly in Colombia. Avianca has already put thousands of its workers on unpaid leave, in addition to announcing plans to shut down operations in Peru, where it has employed around 1,000 people.
The carrier was forced to seek bankruptcy protection after the Colombian government refused to lend a helping hand, and it missed a deadline for bond payment.
“Avianca did not pay USD67 million due on its outstanding unsecured bonds on May 10, 2020, and will not pay the coupon payment of its senior secured bonds due 2023,” says US rating agency Fitch Ratings.
Avianca says it wants to continue operation and is waiting for its key markets – Colombia, the United States, El Salvador, and Ecuador – to reopen for business.
“Avianca is facing the most challenging crisis in our 100-year history as we navigate the effects of the Covid-19 pandemic,” CEO Anko van der Werff said in a statement. “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.”
The aviation industry took a devastating blow from the coronavirus outbreak, as governments around the world ordered the grounding of flights and delayed to bail out airlines.
It will not be a surprise if more airlines go bankrupt, say analysts. In Latin America, according to Reuters, many major aviation companies, including Chile’s LATAM, Brazil’s Gol, and Aeromexico are seeking urgent bailouts from their governments.