Avianca to get $ 370 million loan from Colombian government

Earlier this week, Colombian airline Avianca Airlines announced it would resume flight after five months of inactivity. The airline is currently undergoing restructuring after encountering financial difficulties due to the increase in COVID-19 cases in Latin America. Today, the Colombian government confirmed that it will give Avianca a loan of $ 370 million to help her return to the skies.

Avianca will receive a loan from the Colombian government to help her with her restructuring process. Photo: Avianca

There was never any doubt that Avianca would continue to fly. Although the airline filed for bankruptcy earlier this year, it filed for Chapter 11 protection in the United States. This would allow it to restructure under the guidance of the US courts and prepare for a more solid future.

The question has always been how and when he would fly again. The airline was already restructuring itself and incurred millions of dollars in one-time costs before the virus outbreak brought the industry to a standstill. As a result, Avianca brought its fleet and hubs to a standstill in Colombia, and El Salvador fell silent. She has been asking for state aid for several months to deal with the current crisis.

Government assistance

Now we have more information on the future of Avianca. Colombia’s Ministry of Finance and Public Credit announced today that it will grant the airline a loan of $ 370 million. The loan must be approved by the judge overseeing the existing restructuring process but, if approved, it would help Avianca grow its operations.

Avianca Getty
Avianca was hit hard by the virus outbreak and brought its fleet to a standstill while filing for bankruptcy in the United States. Photo: Getty Images

In a statement regarding the decision, the Colombian government said:

“The benefits for Colombia and its economy by allowing Avianca to move forward with 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 country’s competitiveness.

Economical lifeline

Avianca is the second largest airline in Latin America after LATAM. Avianca holds 45% of the domestic market and 36% of the freight market. It also employs over 14,000 people; however, the government has claimed that it indirectly provides more than 500,000 jobs in the tourism industry. More than just an airline, Avianca is the nation’s lifeline for jobs and tourism. The government loan clearly shows how crucial the airline is to the people of Latin America.

Avianca is crucial to the tourism industry and economy in Colombia. It is in the government’s interest to keep the airline in business. Photo: Getty Images.

The statement continued to emphasize this saying,

“In this decision-making process, the potential negative effects of a permanent shutdown of the services provided by Avianca in terms of economic activity, air transport capacity, job destruction and loss of income have been taken into account. “

Avianca’s future

Avianca is expected to return to the sky from September 1st. The airline will start with just 20 aircraft on 14 domestic routes. Then on September 7e, the airline will add three more routes. So far, there has been no mention of the resumption of international operations. Perhaps the government loan will allow the airline to add longer flights to its schedule this year.

With Avianca taking off in a few days, it will be interesting to see how this loan affects the future plans of the airline and its fleet. The airline recently got rid of its old planes with the aim of modernizing its fleet in the future.

Will you be keeping an eye on Avianca’s future? We would love to hear your thoughts on the airline’s outlook over the next few months.

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