Wednesday, January 19

Avianca exits bankruptcy with low-cost flexibility, says CEO

Avianca Chairman and CEO Adrian Neuhauser said the company was able to reduce debt and build liquidity during an 18-month Chapter 11 reorganization that emerged this week. It will add more seats on airplanes and use the point-to-point route structure popularized by low-cost airlines instead of relying on flying through their hubs.

“We are trying to take the best of who we were, a service-focused airline with a wide network of routes, and combine it with what we have seen our competition do, which has been very effective: offer more“ point-to-point ” and offer lower prices, ”Neuhauser said in an interview. “We are very focused on being disciplined.”

Colombia’s largest airline is now owned by a group of creditors who gave it a financial lifeline during the bankruptcy process. The new owners include Kingsland Holdings, which is controlled by Salvadoran magnate Roberto José Kriete Ávila, and billionaire Ken Griffin’s hedge fund Ciudadela LLC. United Airlines is also a creditor in the group, but its debt has not yet been converted to equity, Neuhauser said.

The restructured company, which is now domiciled in the UK but operates from its headquarters in Bogotá, will remain unlisted until management decides where to place its shares, he said. The company is considering listing on a single exchange, in the UK or the US, but has yet to decide.

The company filed for bankruptcy in May 2020 after governments closed borders to contain the spread of the coronavirus. Latam Airlines and Grupo Aeroméxico followed in the reorganization under US Chapter 11 Avianca, the first of the three to exit the process, will have around US $ 1.2 billion in liquidity and about US $ 3.5 billion of long-term debt , including renewed loans it took on while bankrupt and aircraft leases, Neuhauser said.

The executive expects the company to post a profit in 2023 after its operations return to pre-pandemic levels. The airline is running about 60% of its pre-covid flight program, and domestic business is recovering faster than long-haul flights, especially international business travel, he said.

In response, Avianca is changing its fare offerings and seating arrangements to provide more flexibility, he said.

“We are designing it to focus more on leisure travel and less on business. That doesn’t mean we’re leaving our traditional business customer behind, but it does mean we’re going to cut back on executive cabins and things like that, “he said. “Many of the international business trips before the pandemic were for consultants, bankers, etc., and we see that the recovery is much slower.”