World’s second-oldest airline files for bankruptcy

Another international airline has succumbed to the impacts of the COVID-19 pandemic.

Colombia-based airline Avianca filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Southern District of New York on Sunday as a result of the “unforeseeable impact of the COVID-19 pandemic”, the company said.

The airline’s application for “voluntary reorganisation proceedings” has since been approved by the New York court, which Avianca said would ensure it continues normal business operations throughout the process.

Avianca said it usually has 189 planes in its fleet, which reportedly conduct about 700 flights a day, according to CNN Business.

However, in 2020, the airline’s passenger flights have been grounded since the middle of March, “reducing its consolidated revenue by over 80 per cent and placing significant pressure on its cash reserves,” it said on Monday, as reported by CNN.

Avianca directly employs at least 21,000 people throughout Latin America, including over 14,000 in Colombia, where it serves as the country’s national carrier.

Founded in 1919, the airline claims to be the world’s second-oldest continuously running airline. As of last year, Avianca was considered the third-largest airline in Latin America, after LATAM Airlines and GOL Linhas Aéreas, according to Euromonitor.

Avianca certainly isn’t the first international airline to succumb to the COVID-19 pandemic, but according to Boeing chief executive David Calhoun, it may not be the last.

Speaking to the NBC’s Today show, the incumbent CEO said the industry is having an “apocalyptic” moment, with air travel demand reduced by 95 per cent.

“I don’t want to get too predictive on that subject. But yes, most likely,” Calhoun told NBC News when asked if he thought a major US carrier would have to go out of business.

“Something will happen when September comes around. Traffic levels will not be back to 100 percent. They won’t even be back to 25 percent. So there will definitely be adjustments that have to be made on the part of the airlines.”

It comes despite billions of dollars in public relief for US airlines from the government’s US$25 billion ‘Payroll Support Program’, which saw American Airlines receive a US$5.8 billion package, with Southwest Airlines receiving US$3.2 billion.

Last month, Virgin Australia collapsed after failing to obtain a federal government bailout.

In March, United Kingdom budget carrier Flybe entered administration citing financial challenges, which it said were too great to withstand during the coronavirus pandemic.

It comes as the International Air Transport Association (IATA) predicted passenger revenues will be US$314 billion ($491 billion) below 2019. Airlines are also expected to burn through about US$61 billion (more than $95 billion) in liquidity in this year’s second quarter alone.

Featured image: iStock/Ernesto Tereñes