Avianca Could Stop Paying Some Employees For Up To A Year

The Colombian carrier Avianca presented a furlough program that would keep some workers without a payroll for up to 12 months. Avianca proposed this program to preserve some cash during the coronavirus pandemic, which has dramatically affected the carrier. Back in May, Avianca filed for a Chapter 11 bankruptcy in the US

Avianca will stop paying the wages of some employees for up to a year. Photo: Getty Images.

The number of employees is currently unsustainable

Avianca has been grounded since three months ago. Recently it started to fly domestic operations in Ecuador, but it is not near enough. The carrier has already said that it will become smaller after the pandemic, and it closed its Peru branch. 

Before the pandemic, Avianca had 20,000 employees across South America. Due to the coronavirus’s effect on the air industry, the carrier sees this number as unsustainable at the moment. Renato Covelo, personnel director, said,

“The profound effects of this crisis had forced us to take this type of measure. Our original intention was to preserve all the jobs in our staff.” 

At the beginning of the crisis, Avianca and its workers agreed on a furlough of one to three months. During this first phase, a total of 14,000 employees accepted the offer made by Avianca. But things have changed. Avianca said that the offer is open to any person in the company that is willing to take it.

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Only Avianca Ecuador is operating at the moment. Photo: Getty Images

According to the reports, the employees that will be suspended can take new jobs in the meantime. The only requisite is that they don’t deliver any information about Avianca. When the time’s up, they could return to the Colombian carrier. 

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Will Colombia bail out Avianca?

During the first quarter in 2020, Avianca Holdings lost $121 million. The South American carrier ended 2019 with financial losses as well and was hoping for a brighter 2020. Sadly, the coronavirus pandemic impacted Latin America in the last two weeks of March. Since then, Avianca grounded its entire fleet and went into emergency mode. 

With this in mind, the carrier left one opportunity open: maybe the Colombian State could invest in the airline. Back in April, Adrian Neuhauser, Avianca’s CFO, said, 

“This investment must have an adequate return, composed of a combination of us paying back the debt and the Government becoming a shareholder. We are not against the Government having stakes in the airline.”

According to local newspaper America Economia, we know that the Colombian Government and Avianca are in deep conversations. Recently, Colombia published the Decreto 811. This decree established the possibility of the State to acquire auctions from affected companies such as Avianca. 

“With the establishment of the 811 Decree, which allows the State to buy or sell auctions in companies during the pandemic, it is easier for Avianca to get a rescue loan,” the newspaper said.

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In Latin America, other airlines that have announced furloughs are LATAM and Aerolíneas Argentinas. Aeromexico hasn’t. Photo: Getty Images.

Which other carriers are furloughing employees in Latin America?

Besides Avianca, there are other airlines in Latin America that have furloughed people in the last few weeks. 

At the beginning of June, LATAM Airlines Group announced the firing of 1,000 employees in Colombia, Chile, and Peru. But during the announcement, Roberto Alvo, LATAM’s CEO, said that, of the 42,000 employees it had before the crisis, it currently needed 5,000 to function. LATAM will fire more people in the future, he said.

On the other hand, Aerolíneas Argentinas has repeatedly promised that it will not fire anyone. Nevertheless, the State carrier did say that up to 75% of its employees could be furloughed for two months. Finally, in Mexico, the four leading airlines have announced neither furloughs nor firings, yet.

What do you think of Avianca’s initiative? Let us know in the comments.