BOGOTA, Colombia, May 10, 2020 /PRNewswire/ -- Avianca
Holdings S.A. (NYSE: AVH, BVC: PFAVH) (the "Company" or
"Avianca") and certain of its subsidiaries and affiliates today
filed voluntary petitions under Chapter 11 of the United States
Bankruptcy Code in the U.S. Bankruptcy Court for the Southern
District of New York to preserve
and reorganize Avianca's businesses. LifeMiles™, Avianca's loyalty
program, is administered by a separate company and is not part of
the Chapter 11 filing.
The filing was necessitated by the unforeseeable impact of the
COVID-19 pandemic, which has resulted in a 90% decline in global
passenger traffic and is expected to reduce industry revenues
worldwide by $314 billion, according
to the International Air Transport Association. Avianca's scheduled
passenger operations have been grounded since mid-March, reducing
its consolidated revenue by over 80% and placing significant
pressure on its cash reserves.
Through the Chapter 11 reorganization process, Avianca intends
to:
- Protect and preserve operations so Avianca can continue to
operate and serve customers with safe and reliable air travel,
under the strictest biosafety protocols, as COVID-19 travel
restrictions are gradually lifted;
- Ensure connectivity and drive investment and tourism by
continuing as Colombia's flagship
airline, serving over 50% of the domestic market in Colombia and providing essential non-stop
service across South America,
North America and European markets
as well as continuing cargo operations, playing a key role in the
economic recovery of Colombia and
the Company's other core markets following the COVID-19
pandemic;
- Preserve jobs in Colombia and
other markets where the Company operates, with Avianca directly
responsible for more than 21,000 jobs throughout Latin America, including more than 14,000 in
Colombia, and working with more
than 3,000 vendors; and
- Restructure the Company's balance sheet and obligations to
enable Avianca to navigate the effects of the COVID-19 pandemic as
well as comprehensively address liabilities, leases, aircraft
orders and other commitments.
"Avianca is facing the most challenging crisis in our 100-year
history as we navigate the effects of the COVID-19 pandemic," said
Anko van der Werff, Chief Executive Officer of Avianca. "Despite
the positive results yielded by our 'Avianca 2021' plan, we believe
that, in the face of a complete grounding of our passenger fleet
and a recovery that will be gradual, entering into this process is
a necessary step to address our financial challenges."
"When government-mandated air travel restrictions are lifted and
we are able to gradually resume our passenger flights, we look
forward to welcoming back our furloughed employees and playing a
leading role in restarting the economy in Colombia and our other key markets. We greatly
appreciate the dedication of our employees to Avianca and to
serving the more than 30 million passengers that fly our airline
each year. We remain committed to our purpose to connect people,
families and businesses. Our customers can be confident that they
can continue to depend on Avianca for safe, reliable and
high-quality service, and our valued LifeMiles™ members can expect
to accrue and redeem miles as normal," Mr. Van der Werff continued.
Avianca – like many other airlines around the world, including
in the United States, the European
Union, and Asia as well as in
Latin America – is seeking
financial support from the governments of the countries where it
provides essential services. Avianca continues to be engaged in
discussions with the government of Colombia, as well as those of its other key
markets, regarding financing structures that would provide
additional liquidity through the Chapter 11 process and play a
vital role in ensuring that the Company emerges from its
court-supervised reorganization as a highly competitive and
successful carrier in the Americas. In the interim, while these
discussions are ongoing, the Company intends to utilize its cash on
hand, combined with funds generated from its ongoing operations
(such as cargo), to support the business during the
court-supervised reorganization process.
Mr. Van der Werff added, "We
believe that a reorganization under Chapter 11 is the best path
forward to protect the essential air travel and air transport
services that we provide across Colombia and other markets throughout
Latin America. Avianca has
operated for more than 100 years – only the second airline in the
world to achieve this milestone. We are confident that through this
process we can continue to execute our 'Avianca 2021' plan,
optimize our capital structure and fleet of aircrafts and – with
government support – emerge as a better, more efficient airline
that operates for many more years."
Measures to Protect Employees and Suppliers
As part of the process, Avianca has presented various motions
before the Court in support of its reorganization and the Company
expects the court to decide on these requests in the coming days.
The Company has requested authority to pay certain prepetition
employee wages, compensation and benefit obligations owed from
before the filing date, as well as a request to continue paying
wages and honoring employee benefit programs in normal day-to-day
operations. Avianca has also requested authority to honor various
prepetition obligations owed to certain of its travel agency
partners, vendors and suppliers from before the filing date. The
Company intends to pay vendors and suppliers, as well as travel
agency partners in the ordinary course for goods and services
provided on or after the filing date during its Chapter 11
process.
Continuing to Serve Customers
Avianca has also filed motions to maintain its network and
customer programs throughout this process and customers can expect
to continue to arrange travel and fly with Avianca in the same way
they always have. Customers can expect to use tickets, vouchers and
gift cards purchased before Avianca initiated this process. Avianca
customers will continue to accrue miles when they fly with Avianca,
and can continue to redeem miles earned through LifeMiles™ to
purchase tickets with Avianca during this process. Additional
frequent flyer benefits remain active, including access to VIP
Lounges, priority check-in, upgrades and other benefits. Avianca
also expects to continue to issue ticket refunds and honor travel
coupons and payments or credits associated with baggage or service
claims in adherence with our current policies. Given the impact
COVID-19 has had on travel plans, Avianca will continue to waive
change fees and other penalties associated with changes to
customers' travel plans for tickets purchased until October 31, 2020.
When COVID-19 travel restrictions are lifted, Avianca plans to
resume passenger flights with the strictest biosafety
protocols.
"Avianca 2021" Plan and COVID-19 Impact
Last year, Avianca successfully launched the "Avianca 2021"
plan, and throughout 2019 and in the first two months of 2020, the
Company had achieved significant positive results from this plan.
Through the plan, the Company redesigned its network with 130
routes to 76 destinations in 27 countries, adding to the launch of
a new pricing model "branded fares" in domestic markets in
Ecuador and Colombia, including flights to and from
Europe. These initiatives, along
with customer-centric programs, had resulted in improved
operational indicators, with a passenger-itinerary-completion rate
of 98.7 percent and a 6-point increase in customer satisfaction.
Consistent with the plan, in early 2020 the Company concluded a
successful out-of-court reprofiling of its financial debt and lease
obligations and raised $375 million
in new financing.
However, just as is the case with other airlines around the
world, Avianca's operations have been dramatically impacted by the
COVID-19 pandemic and resulting government-mandated air travel
restrictions, while the Company continues to have high fixed costs.
Of the total number of countries in which Avianca operates, 88
percent have total or partial passenger air transport restrictions,
forcing the airline to take a series of extraordinary and
structural measures. These have included employee furloughs,
temporary wage reductions, reductions in non-essential capital
expenditures and temporary deferred payments on long-term leases.
Avianca has limited visibility as to when current travel
restrictions will be lifted and, once such restrictions are lifted,
it does not expect revenues to return to pre-pandemic levels in the
short-term as the effects on travel are expected to be
long-lasting. These factors, coupled with Avianca's substantial
financial obligations, made it necessary for Avianca to explore
alternatives to reorganize its operations and restructure its
debt.
Peru Operations
In parallel to its Chapter 11 filing in the U.S., Avianca
intends to commence a wind-down of its operations in Peru pursuant to local laws. This decision
supports essential right-sizing efforts and will allow Avianca to
renew its focus on core markets upon emergence from its
court-supervised reorganization.
Chapter 11 Process and Advisors
The Chapter 11 process is a well-established legal process in
the United States of America that
is recognized by other countries around the world. The process is a
temporary one that, according to U.S. law, allows a company to
reorganize and complete a financial restructuring under the
supervision of the U.S. court system, while continuing its
operations under the oversight of its board of directors and
management team. Many companies, including many airlines, have used
the Chapter 11 process to reorganize their financial obligations
and emerge as stronger organizations. Avianca itself underwent a
Chapter 11 process in 2003 that allowed it to position itself for
expansion in Latin America.
To best position Avianca to successfully complete the Chapter 11
process, the Company's Board of Directors has retained world-class
advisors, including Seabury Securities LLC and FTI Consulting,
which are serving as financial advisors to Avianca, as well as
Milbank LLP, Smith, Gambrell & Russell, LLP, Gómez-Pinzón
Abogados and Urdaneta, Vélez, Pearl & Abdallah Abogados, which
are serving as legal counsel. The Company's Board of Directors has
also been advised by Willis Towers
Watson, an independent compensation consultant, in the
establishment of best-practices retention programs for certain
employees who are essential to the Company's Chapter 11
reorganization.
Additional Resources
Additional resources for customers and other stakeholders, and
other information on Avianca's filings, can be accessed by visiting
the Company's Reorganization website at
aviancawillkeeponflying.com. Court filings and other documents
related to the Chapter 11 process in the U.S. are available on a
separate website administered by Avianca's claims agent, Kurtzman
Carson Consultants, at www.kccllc.net/avianca. Information is
also available by calling (866) 967-1780 (U.S./Canada) or +1 (310) 751-2680 (International),
as well as by email at www.kccllc.net/avianca/inquiry.
About Avianca Holdings S.A. (NYSE: AVH) (BVC: PFAVH)
Avianca is the commercial brand for the collection of passenger
airlines and cargo airlines under the umbrella company Avianca
Holdings S.A. Avianca has been flying uninterrupted for 100 years.
With a fleet of 158 aircraft, Avianca serves 76 destinations in 27
countries within the Americas and Europe. With more than 21,000 employees,
Avianca Holdings had revenues of US$4.6
billion in 2019 and transported 30.5 million passengers. On
February 22, 2019, Avianca Holdings
announced its corporate transformation plan consisting of four key
pillars: 1) the improvement of operational indicators, 2) fleet
adjustments, 3) the optimization of operational profitability and
4) repositioning of non-strategic assets. On May 24, 2019, control of Avianca Holdings was
assumed by Kingsland Holdings Limited, an independent third party
of United Airlines.
Forward-Looking Statements
Avianca has included statements in this press release that
constitute "forward-looking statements". As a general matter,
forward-looking statements are those focused on future or
anticipated events or trends, expectations, and beliefs including,
among other things, the Company's expectations with respect to its
Chapter 11 proceedings, the airline industry and the impacts of
COVID-19. Such statements are intended to be identified by words
such as "believe," "expect," "intend," "estimate," "anticipate,"
"will," "project," "plan" and similar expressions in connection
with any discussion of future operating or financial performance.
Any forward-looking statements are and will be based upon the
Company's then-current expectations, estimates and assumptions
regarding future events and are applicable only as of the dates of
such statements. Readers are cautioned not to put undue reliance on
such forward-looking statements.
Forward-looking statements in this press release are not
guarantees of future performance and involve risks and
uncertainties, including with respect to the Chapter 11 process,
related negotiations and hearings before the Bankruptcy Court, as
well as the COVID-19 crisis. Actual results may differ materially
from those projected in this press release for numerous reasons,
including factors outside of the Company's control. The Company
expressly disclaims any obligation to update or revise this press
release, including any forward-looking statements, whether as a
result of new information, future events or otherwise.
Contacts
Investor Contact
Avianca:
Luca Pfeifer, Head of Investor
Relations
ir@avianca.com
(571) (5877700)
U.S. and Europe Media Contact
Avianca:
Adriana Paulinne Sánchez, Corporate Communications
Adriana.sanchez@avianca.com
Joele Frank, Wilkinson Brimmer
Katcher:
Leigh Parrish
lparrish@joelefrank.com
+1 212 355 4449
Central America Media Contacts
Avianca:
Adriana Paulinne Sánchez, Corporate Communications
Adriana.sanchez@avianca.com
LLYC:
Alejandra Aljure, Director
aaljure@llorenteycuenca.com
Colombia and South America
Media Contact
Avianca:
Viviana Escobar, Corporate
Communications
viviana.escobar@avianca.com
View original
content:http://www.prnewswire.com/news-releases/avianca-holdings-initiates-voluntary-reorganization-proceedings-301056305.html
SOURCE Avianca Holdings S.A.