One-Off Costs Set Back Avianca $894 Million

Avianca reports that it had a number of one-time events during its fourth quarter of 2019 which lead to a net loss of US$894 million. But the airline also says that these one-off costs were necessary to put in place its “Avianca 2021” plan.

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Avianca lost more than $800 million in the final quarter of 2019. Photo: Getty Images

Reasons for the loss

During the last quarter of 2019, Avianca renegotiated its debt and leasings. This lead to an arrangement with key providers for $375 million, said the company. Still, due to the sale of 24 airplanes and other charges, the company had a net loss of $894 million. Avianca said all of this was due to an “extensive financial reformulation” and the design of a new strategic plan.

In 2019 the airline sold 10 Airbus A318, and four A320 for $100 million. In January 2020, Avianca also sold 10 Embraer E190.

“2019 was a very tough year. We had to have extraordinary costs, known as one-time events, to go on with our transformation plan. Nevertheless, we recognize positive signs such as the bond exchange, the renegotiation for better conditions, and additional investments.” -Adrian Neuhauser, CEO of Avianca Holdings

Last year, Kingsland Holdings and United Airlines agreed to a loan of up to $250 million. Furthermore, the airline received an extra $125 million from other investors.

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Avianca sold 14 aircraft in 2019 and 10 more in 2020. Photo: Getty Images

2019 in a nutshell

The South American carrier transported 30.5 million passengers in 2019. This meant that there was a 0% growth in the passenger numbers from the previous year. The load factor of the company was a reasonable 81.5%.

On a more positive note, Avianca pushed down its operational expenses by 1.9%. It also ended the year with a route map of over 130 routes in 25 destinations across 26 countries.

Additionally, the airline received the APEX 2020 award for the best airline in South America and was given a rating of 5 stars. Meanwhile, Avianca also launched the Vuela a tu medida strategy, which resembles a low-cost approach for the Ecuatorian and Colombian domestic markets.

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In 2020, Avianca launched Avianca Express. Photo: Avianca

Going into 2020

Avianca started the year launching its new regional carrier, Avianca Express. It also announced new routes to Brazil, as well as a new codeshare agreement with European carrier TAP. It also launched an internal corruption probe with regards to Airbus and aircraft acquisition.

From a financial standpoint, Avianca says it will consolidate its new profitability model. This model will have four pillars: the client, financial strengthening, operational outstanding performance, and the workers.

“We found out that we have allies, providers, and clients that trust in our company. Thanks to them we close 2019 with positive news which allows us to have certainty about Avianca’s future.” – Anko van der Werff, Avianca CEO

For the following months, we can expect that Avianca will push its two main hubs of Bogota and San Salvador. It will also continue with the simplification of its fleet and work to improve  its on-time performance.

Have you traveled recently with Avianca? How was the experience? Let us know in the comments. 

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