It is regarded as the third-largest airline in the region, and so one can imagine the effect on employees as carriers scramble to reschedule flights, ground planes, and furlough staff without pay. Avianca currently has 21,000 employees in Latin America, and more than half of these are in Colombia.

Since last year, analysts from the Centre for Aviation in Sydney have shown in a report that Avianca was struggling with its operations with their negative ratings, change in board control, and abrupt shift in management.

Avianca's bankruptcy to protect and preserve operations

CEO Anko Van Der Werff said in a company statement that Avianca was currently facing the biggest crisis in their century-long history.

"We believe that a reorganization under chapter eleven is the best path forward," he continued, remarking that this was done in due part to protect the essential air travel and air transport services throughout Latin America.

Filing for bankruptcy would allow the company to reorganize financially with the supervision of the American judicial system. In the meantime, they will continue to operate and maintain commitments with clients.

The Colombian airlines announced in a statement that it was gravely affected by the flight bans and the lockdowns all across the world. According to the company, 88% of the countries where Avianca operates are under total or partial measures that restrict or limit travel.

Filing for bankruptcy was a move called by the officials in Avianca to protect and preserve operations and jobs, ensure connectivity, and restructure the company's accounting obligations.

They also planned to cut costs by shutting down its business in countries like Peru to focus on core markets.

Beginning mid-March, Avianca's passenger flights have been grounded, as opposed to the period before the COVID-19 pandemic, where the airlines conducted around 700 flights daily. This significantly reduced their revenue by 80% and pressured their cash reserves.

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Other airlines struggle to make it through the pandemic

Avianca is not the only major airlines that has suffered financial losses during the pandemic. In a report by Reuters, these companies are said to currently be undergoing negotiations with the government for rescue packages. Among these are Aeromexico in Mexico, LATAM Airlines Group in Chile, and Gol Linhas Aereas Inteligentes in Brazil.

Regional airline industry group ALTA warned of the impending "bankruptcy crisis" that would come following the pandemic. Maurício França from L.E.K Consulting said, "The starting point is worse for Latin American airlines."

Legal director at ALTA Gonzalo Yelpo offered his insight on government assistance, "In Latin America we have not seen as much help as in other regions."

In countries with left-leaning federal governments like Argentina and Mexico, authorities forwarded the suggestion to the public that they will not bail out big company airlines.

At the beginning of 2020, Avianca was worth $470 million. Now, during the pandemic, it plummeted to a steep $17 million. After a week with their fleet grounded, Avianca only had a little over $304 million in cash left for expenses like payroll and debt payment.