2020 has been disastrous for most airlines till date. Many airlines have reported losses, the latest being South America’s second largest carrier – Avianca. The Latin American carrier reported a gigantic loss of $121mn for the first quarter of 2020.
It should be noted that the airline was affected for only three weeks during the first quarter of the year, while the pandemic hit hardest in the second quarter. So, Q2 results are expected to be even worse. The same trend is true for most airlines globally, except the Chinese carriers.
About a month ago, Avianca also became the first South American airline to file for bankruptcy protection in a USA court, after spending almost three months being completely grounded. Since then, when global travel restrictions have be eased a bit, it has resumed a handful operations in Ecuador; however, the hubs in El Salvador, Colombia, and Peru still remain closed.
The airline stated in a report:
‘Avianca’s revenue fell 18% in the first three months of the year to $943 million. It has gotten worse and has fallen 51% by early June, 2020.’
Avianca was already hanging by a thread even before the pandemic hit. The airline posted a loss of close of $70mn, same time last year, when passenger air traffic was booming in South America.
Adrian Neuhauser, the Chief Finance Officer of Avianca even stated:
‘2019 was a very tough year. We had to have extraordinary costs, known as one-time events, to go on with our transformation plan.’
Sadly, 2020 has not been kind to any airline globally. Avianca said that, until June 2020, its passenger income has fallen over 51% compared to last year. During the first quarter of 2020, almost $780mn of the $943mn revenue came from passenger operations. As the pandemic did boost cargo operations for many airlines globally, the passenger numbers dropped substantially for Avianca to sustain any profitable business.
Avianca has been getting rid of leased aircraft, thereby, shrinking its fleet from 171 to 158 in just over five months, in an attempt to conserve cash. For most carriers globally, adapting this strategy has worked well. We hope Avianca too finds away to stay afloat amidst the cataclysm.
What are your thoughts about Avianca’s current situation? Will Avianca manage to stay around? Let us know in the comments!