Resistance Builds To Avianca’s Appeal For Colombian Governmental Bailout

Avianca’s (NYSE:AVH, BVC:PFAVH) CEO Anko Van Der Werff took to Youtube last week to make his case for government intervention in the airline, admitting that the airline, after several funding rounds in 2019 can no longer expect any private investors to lend the airline any more money.

The company in a 6-K filing with the US SEC (Securities & Exchange Commission) stated the following:

Given the impact of the COVID-19 pandemic on the airline sector and the correspondingly increased levels of uncertainty regarding the airline industry’s prospects, Avianca today cannot readily access private sector funding sources in sufficient amounts to fulfill its needs. Avianca has therefore engaged in discussions with the different governments where it conducts operations, including, among others, the Colombian government. In the course of such discussions, Avianca has proposed different support structures which it believes would provide these governments with adequate protections, while ensuring that Avianca will be able to continue operations in such markets and maintain connectivity and employment throughout the region. Discussions with governments are continuing, and Avianca has not received formal responses nor has it reached agreement on terms on which eventual support could be provided.

There can be no assurance that such agreements will be reached. Avianca will inform the market in a timely manner when negotiations conclude.

On the other hand, there is growing indignation in the Colombian public at the suggestion that the government, which will already face tremendous economic damage due to the Coronavirus COVID-19 Pandemic would bail out the airline, which is majority controlled by US based aviation giant United Airlines (NASDAQ: UAL) through BRW Aviation (51.43%), and the next largest shareholder being controlled by El Salvador business magnate Roberto Kriete (14.46). Another 20% is traded on the New York Stock Exchange through ADRs (American Depository Receipts) leaving a small minority of shares owned or traded publicly through Colombia’s BVC stock exchange (Bolsa de Valores de Colombia).

See Also: What might happen to Avianca? Will Copa purchase the Airline? (click)

Colombia, like the US taxes residents and companies on worldwide income, so Avianca Holdings has opted to legally be a Panamanian company. According to their SEC filing, the “Address of principal executive office” is:

Edificio P.H. ARIFA, Pisos 9 y 10, Boulevard Oeste

Santa María Business District

Panama City, Republic of Panama

(+507) 205-7000

Colombians seem to have noticed the fact that a Colombian government bailout would be of a foreign majority-owned, foreign domiciled company, even though the firm does employ approximately 11,000 Colombians. No matter what happens with Avianca, thousands are likely to permanently lose their positions with the company as the sector contracts due to the reduced demand in travel amidst the Coronavirus COVID-19 Pandemic. An Avianca bailout would also prioritize Avianca jobs over the thousands of other Colombian employees and entrepreneurs embroiled in this crisis who don’t receive a politically connected bailout.

Bogotá politician Luis Ernesto Gómez tweets that “When they speak of saving Avianca, they are in reality talking about saving United Airlines and Kingsland Holdings.

Cuando hablan de salvar Avianca, están en realidad hablando de salvar a United Airlines y a Kingsland H.

Los recursos de endeduamiento soberano que pagaremos todos por años con nuestros impuestos deben ir a salvar las micro, pequeñas y medianas empresas no a empresas extranjeras pic.twitter.com/yb8Qf5phMU

— Luis Ernesto Gómez? (@LuisErnestoGL) April 29, 2020

Green party congressman Inti Asprilla tweeted “WTF is going on in this country?? People living beside Doña Juana live in an apocalyptic situation right now, while @IvanDuque and the media are talking about saving AVIANCA. INDIGNANT, SHAMELESS AND INDOLENT.” Doña Juana is a large landfill, over 1,000 acres on the outside of Bogotá that suffered a landslide of between 80,000 and 100,000 tons of garbage on April 28^th, sickening and endangering the poor nearby residents in addition to the environmental damage.

Que carajos pasa en este país??
La gente al lado de DOÑA JUANA vive una situación apocalíptica en este momento, mientras tanto @IvanDuque y muchos medios nos hablan es de salvar a AVIANCA.
INDIGNOS, SINVERGÜENZAS E INDOLENTES

— Inti Asprilla (@intiasprilla) April 29, 2020

Colombians have also taken note that the sister of President Ivan Duque is a top Avianca executive.

¿Y si la hermana de Duque pasa la hoja de vida a Satena y yá?

— katy ? (@katy_666) April 29, 2020

One person tweeted: “Why don’t we save our health workers and applaud Avianca?” in response to the manifestations of support across Colombia and other countries for healthcare workers through rounds of public applause?”

#SalvemosAvianca esta propuesta me encanta ???? pic.twitter.com/Y0tiEc6zrK

— JuanG Lopez (@lopez_juang) April 30, 2020

One of Colombia’s most influential presenters, Vicky Dávila weighed in, saying “#SaveTheRich is not acceptable. Even though they call it populist, now we have to save the poorest and middle class, at those nobody looks at. And furthermore, if they are going to help an enterprise, let it be Colombian, and a small or medium business…and get mad if you want!

#SalvarALosRicosEs inaceptable. Aunque digan que es populista, Ahora hay que salvar a los más pobres y a los de clase media, a los que nadie mira. Y además, si van a ayudar a alguna empresa que sea a las colombianas y a las pequeñas y medianas… y pónganse bravos si quieren!

— Vicky Dávila (@VickyDavilaH) April 29, 2020

Should Avianca be saved by the Colombian government? Feel free to speak out below.