Avianca Brazil Airline, the fourth largest airline in the country, filed for in Sao Paulo. The lawsuit was filed in the 1st Court of Bankruptcy and Judicial Reorganization of the capital of Sao Paulo and runs in the secrecy of Justice.
Since last week, the company has been the target of actions calling for the resumption of aircraft leased due to lack of payment. According to the Reuters news agency, the company argues in the document of judicial recovery that the return of airplanes can lead to cancellation of flights and affect 77 thousand passengers.
Avianca’s adviser said on Tuesday night Dec. 11th that the company will keep all flights scheduled. “Passengers can have absolute peace of mind in making their reservations and purchasing their tickets, as all sales will be honored and flights will be maintained.”
Avianca Brasil is independent but shares the same controller as the Colombian Avianca Holdings.
Avianca’s request for judicial recovery does not mean that the company will close its doors, according to Fabiana Solano, a partner in the restructuring department of Felsberg Advogados. She said the measure serves to suspend new charges and renegotiate debt with creditors. “The company continues with the obligation to provide the service.”
The lawyer said that in order to get legal recovery, the company must prove that it can continue to operate and present a plan to pay off its debts with creditors. “If I could not operate, she would file for bankruptcy,” he said.
At least three companies have applied to the courts to request the return of Avianca aircraft, according to the Folha de Sao Paulo newspaper. The most recent case would be that of the Irish Constitution Aircraft, which would have obtained an injunction to retake 11 airplanes.
Citing the balance presented to National Civil Aviation Agency, the newspaper says that in June, the company had R $ 1.168 billion in debt maturing within one year.
At the time, Avianca denied that it was seeking judicial recovery and said that the restructuring of its mesh, with a reduction in the number of airplanes, was foreseen since August. He also said that his operations would not be affected.
The National Civil Aviation Agency said it had not been notified of Avianca Brasil’s request for judicial recovery until the early evening of Tuesday.
“The agency has already requested the necessary clarifications on the provision of assistance to passengers that may be impacted by a possible readjustment of the mesh. If points are identified that are not in accordance with the Agency’s rules, Anac may apply sanctions to the company according to what is verified “the regulatory agency said in a statement.
In addition to having to return airplanes, the airline faces difficulties paying for suppliers and airport concessionaires. The debt to all Brazilian airports, public and private, reaches R $ 100 million, according to the newspaper “O Estado de S. Paulo”. Only with the international airport of São Paulo / Guarulhos, the company would have debt R $ 25 million.
Avianca Brasil was growing rapidly. By the end of 2015, it had 10.5% of the domestic market and less than 1% of the international market. Today, the national market share reaches 13.65% and, in the international market, 7.72% (considering only Brazilian companies). In the same period, only Azul gained market share, but more modestly, going from 17.1% to 18.8% in the domestic segment.
Airlines require large amounts of resources to grow. Azul, for example, went to the stock exchange last year to raise $ 2 billion. At Avianca, however, there was no major injection of capital.
In the quarter ended June, the company raised R $ 130.7 million in loans with banks ABC, Daycoval, Safra, and Fibra, with maturities between 2018 and 2021. Thus, the volume of financing, which at the end of 2017 amounted to R $ 194 million, reached R $ 306 million six months later, according to a report delivered to Anac.
In the document, the company says that it has managed to increase its revenues, but not enough to compensate for the increases in fuel prices and exchange variation. He also says that he is controlling spending and wants to use the market to extend the term of the loans. Of the total financial debt, only 22.7% mature in 2021, and the remainder, until 2019.