Bad news for Roberto Kriete, Chairman of the Board of Directors, and Anko van der Werff, CEO of Avianca S.A.: The Administrative Court of Cundinamarca, a first instance court in Bogotá, blocked a loan to Avianca which had been granted by the Colombian government and totaled US$370 million. The 3 judges affirmed complaints of a plaintiff who had expressed severe concerns about a lack of guarantees on the money being repaid.
The lawsuit came about because plaintiff Jonatan Ruiz, a Colombian national, had questioned the conditions for the granting of the state loan. In his plaint, Señor Ruiz argued that Avianca does not have sufficient funds and assets to ever pay back the millions consisting of taxpayers’ money. Given the lack of resources, the government privileges the airline compared to other borrowers, which constitutes unequal treatment, reads his claim.
Is it all corona’s fault?
The lawsuit alleged that Avianca was already in financial trouble before the outbreak of the current pandemic. Therefore, Covid-19 should not be used to justify state aid, particularly with Avianca being given preferential treatment over other Colombian carriers also facing dire financial conditions, such as EasyFly, Latam Colombia, or Viva Air, Mr. Ruiz argued.
In May, Avianca had filed for Chapter 11 bankruptcy protection in the U.S. Southern District of New York, blaming its financial collapse on the “unpredictable impact of the Covid-19 pandemic.”
Avianca’s embarking on the Via Dolorosa comes amid growing concerns about the sluggish recovery of passenger flights in Latin America and on intercontinental routes served by the Bogotá-based carrier, severely impeding its financial recovery. The decision of the Cundinamarca court puts additional pressure on the management to keep the airline afloat.
The legal dispute continues
Now, the Colombian Finance Ministry and the other defendants have 10 days to respond to the motion. In an announcement, Avianca said that the company intends to provide information to the court which “will evidence that the loan granted by the Colombian government benefits both the country and Avianca,” allowing the airline to continue flying and saving jobs.
An appeal from the Colombian government and/or Avianca seems to be the next logical step. This all the more since the Cundinamarca court ruling is not saying that the Colombian government cannot ever give Avianca a loan. In fact, the judges made clear that more justification is needed.
Cargo fleet is operating at its limits
Meanwhile the carrier has thinned out its passenger services or even cancelled routes completely, such as Bogota – Munich. In contrast, its 13 A330-200 freighter aircraft are in full swing. Exemplified by the sector Madrid-Bogota, that is serviced 3 times per week, and evidenced also by the 3 weekly freighter flights from Amsterdam to the Colombian capital, which are routed via Miami. According to Spanish sources, there are considerations within the management of Avianca to skip Madrid and serve Frankfurt instead. However, at Rhine-Main Airport, the officials are not aware of any slot requests presented by the Colombian airline to the local flight coordinator. At least not up to now.
1919-founded Avianca claims to be the world's second oldest, continuously operating airline after Dutch Methuselah, KLM. The company is also part of the Star Alliance, the industry group that includes other big boys such as Lufthansa, Singapore Airlines, or All Nippon Airlines. Last year, a holding company affiliated with Star member United Airlines bought a majority stake in Avianca.
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