Avianca Holdings S.A, parent company of Bogotá-based Avianca may be clearing financial turbulence after a New York court approved a U.S$2 billion refinancing plan in order for the carrier to clear Chapter 11. Avianca filed for protection in May, less than two months after the national government closed commercial air traffic in Colombia with the onset of the coronavirus pandemic.

Burdened with mounting debt, aircraft leasing obligations and international and domestic route cancellations, cash-strapped Avianca approached the Colombian government for a loan of up to U.S$370 million to maintain credit obligations as thousands of staff were furloughed with quarantine. The approved government loan, however, was met with rebuke from left-wing politicians, as well as Bogotá Mayor Claudia López, claiming that the resources from the National Emergency Fund were being directed to “bail-out” a foreign corporation. The Avianca loan joined a slate of grievances promoted by the national strike committee and was followed by news that the senior directors received some U.S$7.2 million for 2019 bonuses.

The approved US$370 loan was suspended after a private citizen filed a lawsuit against the airline in a Cundinamarca tribunal claiming the misuse of government funds. In a recent statement, Avianca announced that it no longer needed “the participation of the government” given “financial flexibility to support operations and continue with restructuring.”

On Tuesday, the Bankruptcy Court of the Southern District of New York overseeing Chapter 11 process established a bar date of January 20, 2021 by which proofs of claim must be filed.

As of December 2019, Avianca counted with 21,000 employees, operated a fleet of 158 aircraft and served 76 destinations in 27 countries. The flagship turned 100-years in 2019 and same year the second largest carrier in Latin America transported 30 million passengers and generated US$4.6 billion in revenue. Avianca CEO Anko van der Werff has stated that given the current crisis in the aviation industry with Covid-19, the airline in 2021 could continue to cut routes and downsize its fleet up to 40%.