After months of uncertainty regarding state support to commercial aviation, the Colombian government is lending up to $370 million to flag carrier Avianca to be used as part of the company’s restructuring process. The credit must be repaid before November 2021.
The decision to grant funding was approved by Colombia’s treasury dependent Comité de administración del Fondo de Mitigación de Emergencias, which manages funding to be used to mitigate crises and emergencies of national interest.
The committee agreed that Avianca’s request for funding met their conditions as it would help guarantee the continuity of air travel across the country as well as support as many as 500,000 jobs, taking into account the economic benefits that are generated in the surrounding economies as a result of commercial aviation.
Avianca first approached the Colombian government in March when it saw an imminent need for immediate liquidity to be able to meet its growing financial obligations. However, the evaluation process was not free from controversy, as some stakeholders questioned the potential use of public funds in a private company.
The loan granted by Colombia’s government is to be used in the company’s restructuring process as part of the debtor in position (DIP) scheme of Chapter 11 bankruptcy protection which the airline filed for in May. The loan still has to be authorized by the judge overseeing the bankruptcy in New York, according to Reuters.
“We are pleased that the Government of the Republic of Colombia will participate in the Company’s DIP financing and express our gratitude for the confidence and support this commitment demonstrates,” Avianca said in a statement. “Based upon the substantial indications of interest received to date, we are confident in our ability to complete the syndication process and finalize documentation within the next week. We look forward to filing shortly thereafter a motion to approve the financing with the U.S. Bankruptcy Court, which motion will set forth our full DIP financing package, with approval expected during the month of September.”
The airline resumed domestic flights in Colombia on Sept. 2 after weeks of thorough tests on the biosecurity measures in place by local authorities. Throughout the month of September, the Bogota-based carrier will operate flights from its central hub in the Colombian capital to several destinations around the country, including Medellin, Bucaramanga, Cali, Barranquilla, Pereira and San Andres.
Last week, Colombia’s health ministry authorized the resumption of international flights, which were suspended on March 23, as the country closed its borders to international visitors.
Though there is yet to be any information released regarding to which countries Colombian airlines will resume flights, the country’s health ministry is looking at allowing flights to countries with lower contagion rates than the country itself. (https://airlinegeeks.com/2020/09/02/avianca-to-receive-government-funding/)
