Today ANAC, Brazil’s civil aviation authority has moved to suspend Avianca Brazil's operations. According to FlightGlobal, ANAC stated that it has made the decision “to suspend all operations of Avianca Brazil as a precautionary measure”.
This means that all Avianca Brazil flights will be grounded until the airline can ensure safe operation. Apparently, the decision came from information provided by ANAC's operational flight safety department.
This latest news comes just seven days after IATA suspended the airline from the BSP – Bank Settlement Plan - a system developed to facilitate and simplify sales procedures and operates in 180 countries for a total of 370 airlines, according to Sam Chui.
Impact on passengers
By law, Avianca Brazil must refund or rebook passengers who have existing bookings with the airline, on to other carriers. For those with upcoming scheduled flights ANAC recommends contacting Avianca and not go to the airport until new information is released.
The company had been operating 37 flights, on average, per day.
Since filing for bankruptcy protection, the company has already canceled thousands of flights and suspending operations at several airports. In fact, this also follows extensive flight cancellations made earlier this week. The airline's website had issued the following statement:
"Avianca Brasil informs that due to the reduction of its fleet, it has become necessary to cancel some of its flights according to the list below, which is being updated daily according to possible adjustments. At the moment, the company works to generate the smallest possible impact and provide the best service in airports that do not have more flights, in order to guarantee the accommodation of the passengers."
No official statement has yet to come from Avianca Brazil regarding this latest move by ANAC. Their Twitter page has not posted in over a month.
Debt reduction plan at risk
Having already lost $68 million in Q1 2019, this move by ANAC also casts uncertainty on the airline's debt reduction plan. The plan was to auction off assets, such as slots, as a way of paying its debts. However, a grounding of significant length also puts the airline at risk of losing its slot and route authorities. Both of these must be in regular use to be kept by the airline.
Competitor airlines Azul, LATAM and Gol have expressed their interest in taking over these slots. Slots that are being sought after include those at the airports of Sao Paulo Congonhas, São Paulo Guarulhos, Salvador and Rio de Janeiro Santos Dumont.
Avianca is the fourth largest airline in Brazil. However according to O Globo, since the airline has been facing difficulties, its market share has fallen from 12.6% in March to 7.8% for the month of April. Furthermore, the number of passengers has fallen from 880,000 to 599,000 in the same period.
At this time it is still unknown if United Airlines will come to the rescue and acquire the airline. As previously reported, the airline was placed as collateral for half a billion dollars. Therefore, if the company cannot repay United, the American airline would become the controlling shareholder.