Latam Fears End of Avianca – Only 5 Airplanes Left by the End of Next Week

By Xiu Ying, Contributing Reporter

RIO DE JANEIRO, BRAZIL – By the end of next week, Avianca Brazil should have its fleet reduced from 26 to 5 aircrafts. The company recently lost ten airplanes after the jet leaseholders won an open court clash over the airline’s default.

The situation of Avianca worries Latam, who has committed to retaining part of the assets of the indebted competitor in an auction scheduled for May 7. The apprehension stems from the risk that Avianca will have to shut down operations before the auction date.

In the auction, the Avianca certificate of operation will be transferred to seven Independent Productive Units (UPIs) – basically airport slots – which will be created with the company’s assets.

If the company stops operating, the transmission of these certificates will not be possible. Should Avianca be able to survive in the coming weeks, it will need a new capital injection to operate until the completion of UPI sales, which will not happen before the beginning of June.

According to a source close to Avianca, to operate, the company spends between R$5 and R$6 million per day.

“The company’s operation consumes a lot of cash. Since it went into judicial recovery in December, fewer people are buying tickets from Avianca, which worsens the situation.

Other aircrafts will be leaving (Avianca’s fleet) in the coming days and the situation will become even more complicated”, said Cadier. “Any extension that happens in the process of judicial recovery is an additional risk to the business. We’re in a tremendous hurry.”

Despite the rush to complete the deal, Latam did not file an anticipated application for Cade to analyze the merging of UPI.

According to Cadier, the company studies what might be the best approach, since there is a risk of “going out with nothing” from the auction – in case some competitor makes a higher bid.

Avianca Brasil did not want to comment. In a statement, Gol “reiterated its commitment to participate in the competitive process of acquiring assets from Avianca Brazil in the model already approved” and informed that if there is any change in the structure of the auction, it will reevaluate its position.