Avianca has trimmed and delayed its order for A320neos. The Colombia based airline is cutting its existing order for 108 A320neos to 88 and is pushing back delivery to 2025. The move is part of a strategy to steer the financially embattled carrier back into the black.
A report by Jon Hemmerdinger in Flight Global broke the story. He notes that Avianca has amended the order with the cooperation of Airbus and that dropping 20 aircraft from the order allows Avianca to “tailor its aircraft commitments to its future requirements”.
Untangling a web of orders, cancellations and delays
Untangling Avianca’s web of A320neo orders and later adjustments/cancellations is a complex business. Back in 2012, the airline ordered 33 A320neos amongst a larger order for 51 aircraft from the A320 family.
Three years later, Avianca effectively tripled down and ordered another 100 A320neos. At the time, Airbus’ chief operating officer, John Leahy said;
“The A320neo brings Avianca the highest efficiency at the lowest cost, making it ideally suited to operate within their network and especially within the region’s challenging airport.”
That may well be the case but the sunny optimism was undercut in 2018 when rumors were circulating that Avianca was looking to slim down its order, reportedly by as much as half.
In March 2019, Avianca canceled the order for 17 of those A320neos and deferred the delivery of another 35 A320neos. The move would reduce the airline’s financial commitments by USD$2.6 billion between 2020 and 2022.
Now, ten months later, the A320neo order has been further trimmed and the delivery of more aircraft pushed back. Avianca currently has five A320neos in service.
Problems to be addressed at Avianca
The problems Avianca is facing have been well chronicled. In 2017 there was a 50-day strike by Avianca’s pilots, exposing a relationship breakdown with management. This strike cost Avianca a cool USD$232 million.
In 2018, Avianca took a USD$456 million loan to enter into a joint venture with United Airlines. This loan was secured by 516 million Avianca shares. But Avianca later breached the covenants of that loan.
In the same year, Avianca Brasil filed for bankruptcy. While Avianca Colombia and Avianca Brasil are separate airlines, they share a common brand and that brand (and Avianca Colombia’s share price) took a hit as a result of the bankruptcy.
Then you have operational issues like a disparate fleet. This inefficiency is exacerbated with issues like different engine types being used across the wider Avianca A320 fleet. In the macro-environment, the airline is facing stiff competition from local powerhouse airline LATAM and low-cost carriers such as Viva Colombia
Avianca is attempting to transform the airline under the banner of “Avianca 2021.” It is a strategy designed to address the airline’s financial issues. This latest adjustment to the A320neo order is a part of that transformation process.
Simple Flying has approached Avianca for comment but has not heard back prior to publication.