Avianca Posts $68 Million Loss & Bonds Downgraded To Deeper In Junk

Avianca Holdings has reported $68 million loss for the first quarter of this year and its debt has been further downgraded deeper to junk.

The airline has canceled an order of 17 aircraft with Airbus and delayed another 35. The airline reached a load factor of 82.1% during the quarter.

Here’s an excerpt from Bloomberg (access their piece here):

Avianca’s dollar bonds are trading at distressed levels following a spate of bad news for Colombia’s biggest airline.

Avianca Holdings SA $550 million of dollar bonds due in May 2020 plunged this week, sending the yield to 18.6%, from 9.7% at the start of the month. The shares also fell to a record low this week, making them both the worst-performing Colombian stock and the worst-performing Latin American airline this year.

Here’s an excerpt from W Radio (Colombian news outlet – access here):

Other important issues were touched on in the report, one of which is the adjustment in the fleet plan, confirming that Avianca achieved the renegotiation with the manufacturer Airbus for the cancellation of 17 airplanes that had to be delivered and equally paid in the course of the following two years, added to this, the deferral of the incorporation of 35 units was also achieved, generating a cash protection of 350 million dollars until 2021. Within the adjustments, the holding company also confirmed that it postponed the leases in term of contracts of several aircraft which will represent a saving of 14 million dollars per year.

Market Cap Is Rather Low:

 Conclusion

It is not looking good for Avianca. Further losses and bonds are in distressing territory. The owner has also breached some loan covenants with United. The Avianca Brazil basically went under and its slots are auctioned off (same owner but no other ties to the Brazilian airline).

Avianca is trying to scale down its operations by canceling some plane orders and postponing others. We all hope that Avianca can pull it through and get its financials back in order.