Colombian gov't set to offer loan to save Avianca Airlines

Transport Materials 30 August 2020 16:06 (UTC +04:00)
Colombian gov't set to offer loan to save Avianca Airlines

The Colombian government announced on Saturday that it would deliver a 370 million-U.S.-dollar loan to the country's Avianca Airlines, which is currently undergoing a restructuring process after filing for bankruptcy protection in the United States, Trend reports citing Xinhua.

According to a statement released by the Colombian Ministry of Finance and Public Credit, the operation must first "be evaluated and authorized by the judge" in charge of the bankruptcy case.

"The benefits for Colombia and its economy by allowing Avianca to advance in its restructuring and maintain its operations in the country are significant. Affecting Avianca's operations would have negative repercussions on the quality of air service, the economy, and the competitiveness of the country," said the statement.

"In this decision process, the potential adverse effects of a permanent cessation of services provided by Avianca in terms of economic activity, air transportation capacity, job destruction and loss of income were taken into consideration," added the statement.

The proposed government credit would expire in November of next year and the "transaction would take place under the figure of Debtor in Possession under Chapter 11 of the United States Bankruptcy Code."

Avianca is the second-largest carrier in Latin America, "with a 45.5 percent share of the total passengers transported in 2019, serving more than 75 destinations. In cargo transportation, Avianca has 31.6 percent of market share," according to official figures.

The Colombia-based company announced in May that it filed for bankruptcy protection in the United States due to the "unforeseeable impact of the COVID-19 pandemic." The company is currently undergoing bankruptcy restructuring.

Latin America's biggest airline LATAM also filed for bankruptcy protection in the United States in May, according to reports. The Chile-based airline said that its affiliates in Chile, Peru, Colombia, Ecuador and the United States were already in its financial restructuring process.