Brazil’s fourth-largest carrier, Avianca Brazil, has cited the threat of repossession of aircraft as the reason why it had filed for bankruptcy protection, fearing that such an action would see it unable to continue operations. Currently 50 of its 58 aircraft are leased and recent negotiations with lessors have failed to find any common ground. Aircastle has confirmed in a disclosure with the U.S. Securities and Exchange Commission that it was moving to repossess 11 aircraft – one Airbus A330-200 and 10 A320s – on lease to Avianca Brazil. In return, Avianca Brazil is seeking legal protection to block the move.
For the time being, the São Paulo-based airline will continue to operate ‘as normal’. However, part of the reason for Avianca Brazil’s financial woes comes from having to use the U.S. dollar for much of its outgoings such as fuel, which has risen in price, while generating revenue in more-volatile currencies such as the Brazilian real and the Argentinian peso, which have not performed well. The struggling airline has made it clear that Brazil’s aviation regulator, ANAC, could force it to stop issuing tickets to passengers while it resolves current problems, a move that “would dramatically affect (its) cash flow.” ANAC said in a statement that it had not yet been informed of the bankruptcy filing and was asking Avianca Brazil for clarifications about any possible impact on passengers.
Avianca Brazil is owned by Synergy Group, which also controls Avianca Holdings SA, a publicly listed airline based in Colombia. Shares in Colombia’s Avianca fell as much as 25 percent as a result of Avianca Brazil’s filing, before later recovering to a two percent drop.
