World’s second oldest Airline company hit by severe financial crisis

Said to be the world’s second oldest and Latin America’s second-largest airline, filed for bankruptcy, after failing to meet a bond payment deadline, while its pleas for coronavirus aid from Colombia’s government have so far been unsuccessful.

Media reports said that If it fails to come out of bankruptcy, Bogota-based Avianca would be one of the first major carriers worldwide to go under as a result of the pandemic, which has effected  world travel. Avianca has not flown a regularly scheduled passenger flight since late March and most of its 20,000 employees have gone without pay through the crisis.

Avianca CEO Anko van der Werff said in a news release,”“Avianca is facing the most challenging crisis in our 100-year history.” Economics Experts said “This isn’t a surprise at all, the company was heavily indebted despite the fact it tried to restructure its debt last year.”

Avianca, the second-oldest continually operating airline in the world after KLM, had $7.3 billion in debts in 2019. The airline filed for Chapter 11 bankruptcy in New York and said it would continue operations while it restructured its debts. The Colombian Association of Civil Aviators (ACDAC), a union representing many Avianca employees, said it supported the move. Avianca already went through bankruptcy in the early 2000s, from which it was rescued by a Bolivian-born oil businessman, German Efromovich.

Earlier International Air Transport Association (IATA) in its statement said the travel downturn amid the coronavirus outbreak could result in the drop of 25 million airlines jobs world wide. Global airlines warned that up to 25 million jobs across world could at risk due to travel downturn. IATA issued increasingly desperate messages about state of airline industry, and urged governments to help carriers. IATA whose members include the likes of Lufthansa and British Airways parent IAG said; Global air travel slumped by 70 percent at the beginning of the second quarter.

However the Director IATA General Alexandre De Juniac said airlines could not afford to issue refunds. He said customers should accept vouchers. “The key element for us is to avoid running out of cash so refunding the canceled ticket for us is almost unbearable financially speaking,” De Juniac  said. IATA highlighted the loss of jobs and the impact on the world economy if governments let airlines collapse. Three months of severe travel restrictions plus lower traffic over 2020 could put 25 million jobs at risk, IATA warned, adding that about a third of 2.7 million direct jobs in the airline sector had either lost or furloughed.