Colombia Government offers lifeline loan to Avianca

Colombia Government  offers lifeline loan to Avianca

The Colombian government announced on  Saturday, August 29 a loan of up to $370 million for the Avianca airline, paralyzed by the pandemic, within the restructuring process that the company is following under US bankruptcy laws.

The Ministry of Finance justified the lifeline given the “negative repercussions” that the fall of the second-largest airline in Latin America would have for the Colombian economy.

Faced with this risk, the government decided to finance Avianca with “a loan for up to $370 million dollars maturing in November 2021.”

According to the ministry, the disbursement will only be made when the Court of the Southern District of New York endorses the participation of the Colombian State in the restructuring of the airline.

On May 10, Avianca announced its decision to submit to US bankruptcy law, in an attempt to reorganize its debt, arguing the impact that the suspension of flights around the world had on its finances, due to the pandemic.

Towards the end of March, Avianca had to freeze 100% of its commercial operations and ground 142 aircraft, in view of the restrictions established by the government to stop the expansion of Covid-19

After five months of mandatory lockdown, with multiple exceptions, President Iván Duque this week ordered the measures to be further relaxed from September.

The gradual resumption of internal flights is expected, while international air traffic could in principle be reestablished in October.

Although the virus continues to circulate, and already leaves almost 600,000 infected and 19,000 dead since March 6, the president said that there was  a downward trend in the number of infections and deaths.

In the wake of the emergency, Avianca announced unpaid leave for 12,000 of its more than 20,000 plant employees.

According to the government, the company contributes “approximately 500,000 thousand direct and indirect jobs” and its operation represents about “1.4% of GDP” per year.

The main airline in Colombia, Avianca recorded a net loss of $894 million last year, against $1.1 million profit in 2018.

Avianca Holdings is made up of the airlines Avianca and Tampa Cargo (Colombia), Aerogal (Ecuador), and the companies of the Taca Internacional Airline Group, with headquarters in Central America and Peru.