Avianca Holdings has just filed its Chapter 11 plan, and it has shown the immediate future for the company once it exits its bankruptcy proceedings. United Airlines will continue as Avianca’s leading partner (along with Copa Airlines), and we could see many new aircraft entering the airline in the next decade. Let’s investigate further.
How did we come to this?
Avianca was the first carrier to file for a Chapter 11 bankruptcy in early May 2020. The company was in deep trouble following a couple of years of mismanagement, which led to a hard takeover by United Airlines and Kingsland Holdings Limited by mid-2019.
Anko van der Werff was appointed as Avianca’s new CEO, and he started the Avianca 2020 plan; the objective was to reorganize the carrier, and to reduce the unsustainable level of debt.
As part of the Avianca 2020 plan, the carrier reduced its firm commitments with Airbus from 108 A320neo aircraft to 88. It also canceled or deferred A320neo deliveries through 2024.
Nevertheless, the COVID-19 pandemic struck South America in the latter part of March 2020. Avianca was forced to file for a Chapter 11 bankruptcy to reorganize itself and survive.
The carrier accessed a DIP Funding worth US$2 billion and heavily reduced its costs.
What about Avianca’s fleet?
When Avianca filed for Chapter 11, it had a fleet of 158 aircraft, including 147 passenger planes and 11 freighters.
Now, the company projects it will exit Chapter 11 with a fleet of 109 units, heavily downsizing its passenger aircraft to 98 while leaving the freighter segment untouched.
Nevertheless, Avianca is already thinking ahead and expects to receive up to 58 new leased aircraft once Chapter 11 ends. These planes would arrive between 2021 and 2023. The airline said,
“Avianca has commenced a process of amending and assuming its remaining aircraft leases on improved economic terms and entering into approximately 58 new leases with deliveries between 2021 and 2023.”
Regarding new aircraft deliveries by Boeing and Airbus, those won’t happen until 2024.
Currently, Avianca expects to receive two Boeing 787-9 units in 2024 (the remaining order between both companies).
Then, between 2025 and 2028, Avianca will receive 20 Airbus A320neo each year and an additional eight aircraft in 2029. Nevertheless, these orders aren’t wholly guaranteed. “Avianca currently is undertaking negotiations with Airbus and Boeing to assume and amend or reject these purchase agreements,” said the company.
United is the partner to go
United Airlines is a key partner to Avianca, as well as the Star Alliance. The South American company said it expects to build on its core strengths, becoming a more cost-efficient airline and an elite competitor while keeping its membership in Star Alliance.
Regarding United Airlines, both companies have agreed to extend their partnership seven years, until September 2030.
Every leading US carrier now has a partner-to-go in the Latin American market, building the blocks for a fantastic competition in the region. United has Avianca and Copa Airlines (Azul could enter this alliance); American Airlines has GOL and JetSMART, and Delta has Aeromexico and LATAM.
What do you think of Avianca’s plan? Let us know in the comments below.