Bogota-based carrier Avianca has made changes to its outstanding orders with both European manufacturer Airbus and American manufacturer Boeing. The changes mean that the existing order for three Boeing 787 Dreamliner aircraft has been placed on hold indefinitely.
The Colombian flag-carrier is one of the oldest airlines in the world, second only to Dutch airline KLM, and recently celebrated its 100th anniversary. But despite its rich history, the airline has been struggling in recent years.
Another sign of trouble came this week as the airline announced significant changes to its outstanding orders. Originally, the airline was due to accept the delivery of two Boeing 787-9 Dreamliners in 2021. These have now been delayed, indefinitely. The airline and the manufacturer have not released any comments except to say the change to the agreement was “mutually beneficial”.
But it’s not only Boeing who has had to agree to new orders. Avianca has also reduced an outstanding order of Airbus A320neo aircraft from 108 to just 88 planes. Not only has the amount reduced but its also delayed. The airline was originally due to phase the aircraft into its fleet between 2020 and 2024. However, delivery will now begin in 2025 and will continue through to 2029.
Avianca already operates a fleet of 13 Boeing 787s and has said it is still “comfortable” using these aircraft. So, it seems Avianca’s decision is based on its own financial position rather than Boeing’s reputation.
In place of the canceled Boeing and Airbus aircraft, the airline has reached an agreement to lease 12 A320neo narrow-body jets from BOC Aviation. BOC Aviation has 20 Airbus A320neo on order. However, Avianca isn’t expected to take delivery of the rented aircraft until at least 2023, giving it plenty of time to prepare for the changes to its fleet.
In a statement regarding the changes, Avianca’s chief financial officer Adrian Neuhauser said the new agreements put Avianca in “a solid position as it moves forward with the Avianca 2021 plan”.
The changes to Avianca’s order book are part of an ongoing business plan the airline calls “Avianca 2021”. Avianca said on Tuesday this was part of a “fleet optimization” plan which is a continuation of the plan announced in mid-2019.
Last year, the airline said it was struggling financially and was looking to make changes to help improve its situation going forward. The two-year plan highlights the need to streamline the airline’s fleet, reduce costs and expand its Bogotá hub.
The airline is also looking to develop partnerships with United Airlines and Copa Airlines to facilitate routes to the US in an attempt to boost revenues.
The airline has already declared bankruptcy once before, back in 2003, but changes to its financial structure got it back on its feet. However, Avianca has been struggling again for a while now.
In 2019 it changed ownership and restructured its existing debt in an attempt to make a profit. It is currently being supported by a $250 million loan from United Airlines and Kingsland Holdings.
The Avianca 2021 plan seems like a final push for the airline. It would be a shame for an airline with such a rich history to join the scores of bankrupt airlines from recent years. Hopefully, by changing orders and renting aircraft, it will once again be a thriving airline by 2021.
What do you think of Avianca’s plan? Are the changes to the order a smart move to save cash and get the airline back to a profit or is it a warning sign of another airline on the way out? Let us know what you think in the comments below.