In an interview with the Chilean newspaper La Tercera, Avianca’s chief financial officer, Adrián Neuhauser, reported that the COVID-19 pandemic will force a structural reduction in the Colombian company. The CFO predicts that the company’s operational staff will be reduced from 20,000 to 14,000 specialists in the coming months.
Management indicated that the past few months have been challenging to the company’s financial reality. “Before Covid, we were just over 20,000 employees, but we weren’t an efficient company. We believe that Avianca will be operationally 30% smaller after Covid, which in the long term would mean that around 14,000 people will work, ”Neuhauser said in an interview with the newspaper.
Today about half of Avianca’s workforce has suspended contracts due to the crisis. The company believes that once the US restructuring plan has been fully approved, a reorganization aimed at reducing the company can be initiated. The measure includes voluntary pension plans that must be completed within two years.
Avianca is currently the main regional competitor for Latam Airlines. That year, both companies filed for financial recovery based on the US Bankruptcy Act (Chapter 11). Last week, the US bankruptcy court approved access to a $ 2 billion loan for restructuring. The Colombian company saw an 80% revenue loss due to the health crisis.
The Colombian government also approved a $ 370 million loan to aid the company’s rescue process. However, the bailout has been suspended by the courts and it is not yet known what it will look like. However, Neuhauser points out that the company has been able to obtain replacement funding from other sources, which has guaranteed the company’s survival through the crisis and less reliance on the government.
Neuhauser said Avianca will re-evaluate its network and reduce flight availability and the aircraft’s capacity to increase business and profitability.
“Profitability remains a critical focus. If we reformulate the deal and adjust the offer, we believe that profitability will be 70% higher than before. This company had grown very quickly and had a lot of capacity on many routes which did not meet demand. It is important not to generate oversupply and the approach to profitability will be adjusted, which will shrink the network and adjust costs to the new magnitude, “the executive said.