COVID 19. Will Avianca successfully emerge from Chapter 11?

Premium Analysis

Avianca Holdings’ decision to seek Chapter 11 bankruptcy protection was hardly surprising. Despite making some progress in restructuring debt during the past year, Avianca entered the crisis spurred by the COVID-19 pandemic in a weaker position than many airlines. With little government support and debt coming due, bankruptcy was the company’s only choice to attempt to weather the crisis. 

Before the crisis, Avianca was overhauling its operations, focusing on bolstering Bogotá as a connecting point and expanding international operations from the airport. But obviously that strategy will be put on hold for the foreseeable future as borders remain closed and international demand is not forecast to rebound for a number of years. 

At this point there is no certainty that Avianca, Colombia’s largest airline, will ultimately emerge from bankruptcy intact.

If one of the oldest airline brands ceases to exist the likelihood of any operator stepping in to fill the void left by Avianca is low, since airlines are in the midst of working to determine their optimal size in a post COVID-19 environment. 

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