Avianca To Get Up To $370 Million Loan From Colombian Government

Earlier this week, Colombian carrier Avianca Airlines announced it would take to the skies again after five months of inactivity. The airline is currently undergoing restructuring after facing financial difficulties brought on by the increase in COVID-19 cases in Latin America. Now, the Colombian government has confirmed that it will be providing Avianca with a $370 million loan to help it get back in the skies.

Avianca US Routes 787 Dreamliner
Avianca will receive a loan from the Colombian Government to help its restructuring process. Photo: Avianca

There has never been any doubt that Avianca would keep flying. Although the airline filed for bankruptcy earlier this year, it filed under Chapter 11 protection in the US. This would allow it to restructure under the guidance of the US courts and prepare for a stronger future.

The question has always been how and when it would fly again. The airline was already restructuring and had occurred millions of dollars of one-off costs before the virus outbreak brought the industry to a standstill. Consequently, Avianca grounded its fleet and its hubs in Colombia, and El Salvador fell silent. It has been asking for state aid to help deal with the current crisis for several months.

Government help

Now, we’ve got more information about Avianca’s future. The Colombian Ministry of Finance and Public Credit announced today it would be providing the airline with a loan of $370 million. The loan needs to be approved by the judge overseeing the existing restructuring procedure but, if approved, would help Avianca grow its operations.

Avianca Getty
Avianca was hit hard by the virus outbreak and grounded its fleet while filing for bankruptcy in the US. Photo: Getty Images

In a statement regarding the decision, the Colombian Government said,

“The benefits for Colombia and its economy by allowing Avianca to advance in 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 competitiveness of the country.” 

Economic lifeline

Avianca is Latin America’s second-largest airline after LATAM. Avianca has a 45% share of the domestic market and a 36% share of the cargo market. It also employs over 14,000 people; however, the government has claimed it indirectly provides over 500,000 jobs in the tourism industry. More than just an airline, Avianca is the lifeline of the nation for employment and tourism. The government’s loan is a clear indication of just how crucial the airline is for the people of Latin America.

Avianca is crucial for Colombia’s tourism industry and economy. It’s in the government’s best interests to keep the airline flying. Photo: Getty Images.

The statement continued to highlight this saying,

“In this decision process, the potential adverse effects of a permanent cessation of services provided by Avianca in terms of economic activity, air transportation capacity, job destruction and loss of income were taken into consideration.”

Avianca’s future

Avianca is due to get back in the skies from September 1st. The airline will begin with just 20 aircraft on 14 domestic routes. Then, on September 7th, the airline will add three more routes. So far, there has been no mention of resuming international operations. Perhaps the government loan will allow the airline to add some longer flights to its schedule this year.

With Avianca taking off in just a few days, it will be interesting to see how this loan affects the airline’s future plans and their fleet. The airline has recently gotten rid of its older aircraft looking to modernize its fleet moving forward.

Will you be keeping an eye on Avianca’s future? We’d love to hear your thoughts on the airline’s prospects over the coming months.