Avianca works to attain its leverage goals by slashing its capex commitments through 2019

Latin American airline group Avianca Holdings is joining its counterparts based in the region by taking steps to de-lever in order to equip itself properly to withstand continuing economic weakness in the region. One of the most important changes Avianca has undertaken in 2016 is re-engineering its order book with Airbus to cut deliveries from 2017 to 2019, which is pivotal in order for Avianca to reach its leverage targets.

Nearly every Latin American airline group during the past year has taken several steps to slow its fleet growth as the region's economy is forecast to contract for a second consecutive year in 2016. Although Avianca's yield declines improved (reduced) sequentially from 4Q2016 to 1Q2016, the second quarter is typically the weakest period for the airline, which could mean that its yield performance will slide before possibly showing some slight improvement in 2H016.

Despite the tough conditions, Avianca has a relatively optimistic outlook as it works to rework its fleet commitments and cut costs. Avianca still plans to expand capacity in 2016, but its growth is falling well below the 8% increase that the company posted in 2015.