Avianca to lay off 6,000 and reduce capacity – CFO

The coronavirus pandemic will force Avianca Holdings to downsize, in which the size of the Avianca Airlines (AV, Bogotá) parent’s workforce should be cut from 20,000 to 14,000 people, Adrián Neuhauser, its chief financial officer, has told the Chilean newspaper La Tercera in an interview. “This has been like several years in one. We came out of a restructuring at the beginning of the year, in January and February, we showed solid results from the financial and operational side, but then came covid,” he said.“Today, about half of Avianca’s workforce have had their contracts suspended as a result of the crisis, and the company hopes that as of the approval of the Chapter 11 restructuring plan it will be able to initiate restructuring that points towards a reduction in the company. It may seek agreements for voluntary retirement plans to be concluded within about two years.” He further elaborated: “Before covid, we were just over 20,000 employees, and we were not an efficient company. We believe that post-covid we will be operationally 30% smaller, which would imply around 14,000 in the long term.” As previously reported, earlier this month the US Bankruptcy Court for the Southern District of New York approved a proposed financing plan allowing Avianca Holdings, which has buckled under an 80% loss in revenue since the start of the crisis, to access about USD2 billion to support its operations while it seeks an exit from Chapter 11. On October 14, the company announced in a stock exchange filing that, on that day, the documentation of its debtor-in-possession (DIP) financing had been made effective and it received an initial disbursement. The Colombian government has also approved a loan of USD370 million, but this has been suspended by the courts. Neuhauser claimed that the company had been able to obtain alternative financing from other sources, which had ensured its survival without much dependence on the government. The next step, meanwhile, is to expand profitability. “Profitability remains a critical focus. When we reformulate the business and adjust the product, we believe profitability will be 70% higher than before. This company grew very fast and placed a lot of capacity on many routes that was not in line with demand. It is essential not to generate excess supply, [so that we] shrink the network and adjust costs to a new scale,” the finance executive said.