Colombian President Ivan Duque announced a $370 million USD loan to Avianca, where his sister Maria Paula Duque is a top executive, a move protested by other Colombian airlines, who said the preferential treatment was unwarranted. A Colombian citizen filed a lawsuit and managed to obtain an injunction, temporarily blocking the loan, saying it improperly put at risk public funds without adequate guarantees. Avianca has indicated that it is preparing an appeal, and that without the bailout, it likely won’t survive.

Avianca CEO Anko Van Der Werff received almost half of the $10 million USD in insider bonuses.

Avianca in its court filings admits to paying millions in bonuses to seven top Avianca executives while simultaneously furloughing or firing thousands of Avianca employees. Former Avianca pilots in Peru meanwhile, have legal proceedings against the airline for violating early retirement pledges. Spreadsheets of the payments made are shown below.

In a written statement, Avianca responded to Finance Colombia’s inquiry regarding the payments:

As Avianca (AVH) reported within the documents presented in the process of Chapter 11, at the beginning of this year the company made certain payments to its executives. Part of these payments is related to labor obligations corresponding to the year 2019 and with the results obtained in the process of debt reprofiling in 2019.

On the other hand, before Avianca Holdings S.A. (“AVH”) and its subsidiaries will start the Chapter 11 process, the company’s Board of Directors approved retention plans as part of the ordinary course of business and authorized other payments related to a retention that was developed to seek that the company’s management team remain with AVH throughout the Chapter 11 process. Based on the advisors of the company, these plans are best practices for companies that are in the Chapter 11 process and were developed with the assistance of a consultant from independent compensation and by evaluating companies with comparable income.

The Board of Directors considers that AVH employees who are included in these plans are critical to completing the Chapter 11 process and ensuring that AVH continue to operate profitably and safely at the end of this process. All this The information was made public a few weeks ago when it was presented to the Court of New York, where the Chapter 11 process is taking place, and from the beginning of this process, AVH has been open and has complied with the standards, processes and requirements provided in Chapter 11 on these plans.

Filings (see below) show that CFO Adrian Neuhauser Berlin and CEO Anko Van Der Werff both received over $4 million in bonuses, with the rest distributed among EVP of Sales & Marketing Silvia Mosquera Gonzalez, General Counsel Renato Covelo Frutos, CIO Michael Ruplitsch, Chief Planning & Strategy Officer Michael Anthony Swiatek, and SVP of Operations Eduardo Mendoza De La Torre. President Ivan Duque’s sister, Maria Paula Duque who is listed as Avianca’s Senior Vice President of Strategic Relations & Customer Experience does not appear on the insider bonus roster, nor do Senior Vice President of Purchasing Diana Calixto, or Engineering & Maintenance Senior Vice President José Luis Quiros. As of publication, Finance Colombia has not been able to ascertain whether these individuals were paid from a separate operating subsidiary. Many financial disclosures for Avianca’s operating and investment subsidiaries were submitted separately.

Below are three pages from Case # 20-11134 filed with the United States Bankruptcy Court for the Southern District of New York titled: “Payments or other transfers of property made within 1 year before filing this case that benefitted any insider.”

Click on any image below to enlarge for reading.

Above photo courtesy Avianca Holdings

The strike, which could begin this week, perhaps as soon as September 20, is the result of an inability of the two sides to reach an agreement over wages and benefits, said the ACDAC head on Friday after breaking off negotiations. Discussions had been ongoing since August 23.

The union — which includes some 700 of Avianca’s roughly 1,300 pilots — has cited various concerns, including aviation security issues, but chiefly feels aggrieved that its Colombian members make 30% to 70% less than Avianca pilots in other countries, according to ACDAC head Jaime Hernandez. During negotiations, the union has sought to end this “wage discrimination,” according to ACDAC, as well as reduce the workload of its members.

According to Avianca, enacting a strike would be illegal. While the Bogotá-based carrier acknowledges that employees have a right to strike that is guaranteed under the Colombian constitution, it says that this doesn’t apply in the case of “essential public services.” The airline, citing a 1995 law (“Law 336”), argues that air transportation classifies as an essential service.

“We call on ACDAC’s directors and pilots who are part of this association to act sensibly, recognize the efforts that have been made, and not resort to extralegal recourses,” said Eduardo Mendoza, vice president of safety, ethics, and compliance at Avianca.

The airline, which said in a statement that it “categorically rejects the call for a strike,” maintains that it presented ACDAC with “more than 20 proposals to extend the benefits received by Colombian pilots” and that the union “did not accept any of the proposals and unilaterally ended” the discussions.

Avianca further criticized the union’s decision since it “prevents the parties from using the 20-day extension allowed by law to reach an agreement.”