Avianca Lands Colombian Financing As Part Of Restructuring

Credit: Rob Finlayson

The Colombian government has agreed to loan Avianca Holdings up to $370 million as part of a restructuring designed to get the airline back on solid financial footing. 

The funding would give the airline a much-needed boost ahead of its planned resumption of passenger operations in Colombia.

“Based upon the substantial indications of interest received to date, we are confident in our ability to complete the syndication process and finalize documentation within the next week,” the company said in an Aug. 30 statement. “We look forward to filing shortly thereafter a motion to approve the financing with the U.S. Bankruptcy Court, which motion will set forth our full DIP [debtor-in-possession] financing package, with approval expected during the month of September.”

Colombia’s funding will come from its emergency mitigation fund and be part of what the airline expects to be $2 billion in financing announced earlier in August. The projected total includes $1.2 billion in new debtor-in-possession (DIP) financing from public and private sources, as well as restructuring of existing debt. 

“In addition to the Colombian government committing to participate in the DIP loan—by providing approximately 30% of the new funds, or 20% of the total DIP financing—we are also very pleased with the positive reception the DIP loan structure has received from third-party institutional investors that, along with existing lenders, are expected to provide a substantial majority of the DIP loan financing,” Avianca said.

Avianca filed for U.S. Chapter 11 bankruptcy protection in May, joining several carriers in the region that did not receive government support in the wake of the COVID-19 pandemic and turned to court-supervised financial support. The airline shut down its Avianca Peru subsidiary as part of its survival plan. Avianca’s reorganization centers on securing the DIP funding with several assets, including its LifeMiles loyalty program and cargo subsidiary.

The airline grounded its fleet in late March as the spread of the novel coronavirus eroded demand and led to travel restrictions. Avianca has conducted cargo and limited passenger operations but has been shut out of its two key hubs in Bogota, Colombia and San Salvador, El Salvador, because of government travel restrictions in each country.

In recent days, the airline unveiled plans to re-start Colombia flights on Sept. 1, in lock-step with the country’s planned re-opening of 15 airports in the coming weeks.

Avianca’s initial passenger network will cover 14 routes, or 12% of its pre-pandemic network in the country. The airline plans to operate a fleet of 20 aircraft, including Airbus A320s and ATR72s.

El Salvador tentatively plans to re-open San Salvador’s Óscar Arnulfo Romero International Airport to commercial flights on Sept. 19.

Sean Broderick

Senior Air Transport & Safety Editor Sean Broderick covers aviation safety, MRO, and the airline business from Aviation Week Network's Washington, D.C. office.