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Avianca Seeks $1.2B Bailout From Colombia

by John Ollila
April 30, 2020
Reading Time: 2 mins read
3

Avianca, the second oldest airline, still operating, is in a deep financial hole like most of the world’s carriers due to Covid-19 pandemic, and is seeking a bailout from the Government of Colombia.

Colombia sold its stake of Avianca back in 2004, and there is hesitation within the country to spend $1.2B, saving the airline that is now domiciled in Panama. The airline’s new CEO is vocal in search of support.

You can access Avianca here.

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Here’s an excerpt from the City Paper (access their piece here):

For Avianca Holdings the return to financial stability involved a shake-up of the board in 2019 ousting the company’s CEO Hernan Rincón for van Der Werff and securing an emergency loan of US$500 million to cover losses sustained by a prolonged pilot’s strike in the final months of 2017. Balancing the books of the world’s second-oldest airline also required replacing Avianca Holding’s largest shareholder Germán Efromovich with Robert Kreite of Kingsland Holdings as director, as well as slashing unprofitable routes throughout the Americas.

While United Airlines received a US$5 billion bailout in federal government aid to save salaries and benefits for employees until October, Avianca is also requesting the Colombian government come to its rescue with an estimated package of US$1.2 billion (COP$4,8 billion pesos) even though the government sold its stake in the carrier to Brazilian businessman German Efromovich back in 2004.

What can LifeMiles members do with high balances?

Avianca Brazil Plane

Reader Question: Can I Transfer Avianca LifeMiles Out? (Pending Airline Collapse)

Conclusion

Avianca’s financials likely are a terrible mess because United entirely wrote off the loans extended to the former majority owner (Avianca’s shares guaranteed the loan) and the airline itself.

Avianca has subsidiaries all over Central and Northern South America, likely complicating the rescue. The Avianca Brazil folded last year that was separate airline but owned by the same entity.

There is resistance in Colombia bailing out an airline partially due to the previous owner Efromovich who was not well-liked. Interesting to see how this will play out.

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