One Of The Oldest Airlines Goes Bankrupt

Avianca Airlines, the second oldest functioning airline of the world from Colombia, has filed for bankruptcy following loss due to worldwide Covid-19 lockdown. A number of airlines have taken similar measures to revive or close down their companies following a huge slump in demand and an increase in losses. Complete Coverage: Coronavirus

Crux of the Matter

Avianca Airlines The 2nd oldest functioning airline in the world, Avianca airlines was found in 1919. It was the 3rd largest airline in Latin America by market share. It employed 21,000 people directly, of which 14,000 were from Colombia. Already in a debt of $7.3 billion by 2019, the company saw a loss of 80% of its revenue due to worldwide lockdown. The airlines has filed for bankruptcy under chapter 11 in US Court. The following changes to occur:

1. The debtor would continue to operate under the provision of “Debtor in Possession” (DIP), wherein despite owing debt to creditors, the company continues operations

2. Court would preside over major decisions like expansion, sale of assets, etc.

3. The measure helps in the company’s revival instead of its liquidation

Virgin Australia in the Same Plane Virgin Australia has moved for ‘voluntary administration’ due to similar losses. It is the 2nd largest airlines in Australia, accounting for 31% of domestic flights before the lockdown. It had a workforce of around 10,000 employees. Already in debt of ~$7 billion, the airlines had further losses due to lockdown. Virgin Australia has applied for ‘voluntary administration’, under which following changes will ensue:

1. A court-appointed Registered Liquidator would be appointed as an administrator to close down the company

2. The administrator would sell company assets with the goal of paying off as many creditors as possible

3. The administrator would investigate the cause of company’s dismal economy

Impact of Lockdown on Airlines Airlines all over the world may face a loss of $120 billion of passenger airfare, as per International Air Transport Association (IATA). However, cargo planes are less affected as they continue to carry essential goods, albeit at a reduced rate. Some airlines are reducing their workforce like Virgin Atlantic, which has reduced it by 30% while seeking investors to revive the company instead of liquidating.

Curiopedia

1. In its annual shareholder’s meeting in the first week of May, billionaire Warren Buffett announced that his company Berkshire Hathaway has sold all of its shares in the four largest US airlines. Mr Buffett’s comments came just hours after Berkshire Hathaway announced a record $50bn net first quarter loss.

2. Passenger airlines have suffered a worldwide lockdown for the first time since World War II. Commercial aviation grew rapidly after WWII as the experience of designing bombers helped in building heavy commercial aircrafts.

3. KLM Royal Dutch Airlines, legally Koninklijke Luchtvaart Maatschappij N.V., is the flag carrier airline of the Netherlands. It is the oldest airline in the world still operating. The first airline company was DELAG from Germany, which was established a decade before KLM in 1909 but ceased its operations in 1935.

Cuated Coverage

1. CNN Business – Avianca, one of Latin America’s largest airlines, files for bankruptcy

2. Bloomberg – Virgin Atlantic to Pitch Investors Amid Administration Risks

3. Business Insider – Avianca, one of Latin America’s largest airlines, files for bankruptcy

4. BBC – Virgin Australia slumps into administration

#Airlines #Coronavirus