Citing fear of aircraft repossession, Avianca Brasil filed for bankruptcy protection in São Paulo on Monday.
Earlier this week I wrote about the issues facing Avianca Brasil…and how it might indirectly impact United Airlines. After a Brazilian court ordered debt-ridden Avianca to return 20% of its fleet to lessors, the carrier promised an out-of-court settlement. That did not happen, unless you consider a strategic bankruptcy such a “settlement.” Avianca blamed the move on its failure reach a “friendly” agreement with its creditors.
Avianca said that absent its bankruptcy filing it would be unable to honor passenger tickets during the month of December. In essence, this bankruptcy moves just buys the carrier time to find an alternate debt solution. While a court could still order Avianca to return the aircraft, the bankruptcy filing means at least another week or two. A lower court sided with Avianca last night, stressing the impact on passengers such aircraft repossession would have. In its bankruptcy filing, Avianca indicated that it is facing three lawsuits concerning 14 aircraft. The airline directly blames the strong USD and high fuel prices for its economic turmoil.
But creditors are obviously not happy. One such creditor, Aircastle Ltd, quickly terminated the lease on 11 additional aircraft. Now Aircastle wants it will start “exercising remedies” to reprocess the leased aircraft. Other debtors include state-controlled oil company Petrobras, General Electric, and Pratt & Whitney.
CONCLUSION
Cash is king and Avianca Brasil is broke. That is why the Avianca Colombia connection I wrote about on Monday is so important. Absent some cash from German Efromovich (via United Airlines), there is a very real chance Avianca Brasil will not survive.
> Read More: As Court Orders Airline To Surrender 20% Of Fleet, United Watches From Afar
image: Avianca Brasil
I wanted to correct your spelling, but you’re right…soooo, now I’m just commenting. Hope you and anyone else who reads this is having a great week. Happy holidays!