The Colombian carrier Avianca is planning to move its address to the United Kingdom, in order to obtain greater tax benefits post its Chapter 11 bankruptcy process. If approved by the US bankruptcy court, this decision would create a new company called Avianca Group International Limited. What does this mean for the future of Avianca? Let’s investigate further.
Avianca Group International Limited
Despite being an airline with origins in Colombia, Avianca currently has its legal address in Panama. Nevertheless, it has Air Operator Certificates in countries like Colombia, El Salvador, Costa Rica, Ecuador, and even had in Peru. Those certificates won’t be impacted if Avianca relocates its address to the UK. The headquarters won’t be moving either to Europe.
Avianca moving its legal address to the UK would be a financial decision.
“The proposal to settle the new holding company in the UK is based on the fact that the rules and decisions of the Chapter 11 process are recognized in that region. Thus, the new domicile does not imply any change in the operation or presence of an airline in its jurisdictions.”
Adrian Neuhauser, Avianca’s CEO, added that the UK won’t create any additional tax burden or inefficiencies against the current infrastructure.
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Could it happen?
Avianca has just recently announced its plans to move its address to the UK to gain greater tax benefits. It is a part of its restructuring plan from the Chapter 11 bankruptcy process, so it has to be approved by the US court.
According to Bloomberg, Avianca’s decision surprised the judge overseeing the company’s proceeding. This judge is said to be unhappy with Avianca’s decision to move its address to the UK and not disclose it sooner.
Additionally, Avianca Group International Limited would create new stocks, allowing the company to pay its creditors and Chapter 11 fundings. In the meantime, Avianca Holdings, the current company based in Panama will continue to exist, but the stocks will remain null of any value.
Most likely, the judge will approve Avianca’s Chapter 11 restructuring plan, allowing the company to move its address to the UK.
How’s Avianca’s recovery going?
Avianca is currently benefitting from Colombia’s open borders. The airline has been gradually increasing its operations in South America.
According to Cirium’s database, Avianca has scheduled 13,075 flights in November. That’s a 36.1% decrease compared to 2019 levels. Nevertheless, when taking into account only the Colombian domestic market, Avianca will operate at 75% of its pre-pandemic levels. Avianca expects to reach pre-pandemic capacity by April 2022.
Avianca’s most important routes are in the Colombian domestic market. The carrier has scheduled 549 flights between Bogota and Medellin (although that’s a 25% decrease compared to 2019 levels).
These are Avianca’s most important routes in November:
- Bogota Bucaramanga
- Santa Marta-Bogota
- Quito-Guayaquil, in Ecuador. The airline is offering 152 flights on this route, only 5.6% under its pre-pandemic numbers.
Moreover, in terms of its Chapter 11 reorganization, Avianca recently announced it will continue to serve its long-haul markets only with the Boeing 787 Dreamliner fleet. That means it will retire (or refocus to the cargo segment) its Airbus A330 fleet.
Finally, Avianca has recently shown the new seats and three classes for its Airbus A320 fleet. We talked about the subject in Simple Flying en Español.
What do you think about Avianca’s plan to change its address to the UK? Let us know in the comments below.