Colombia’s Avianca Airlines, the world’s second-oldest airline after KLM, has turned the corner after bankruptcy and finally achieved a profit
The host airline for Routes Americas 2024 posted a US$131 million profit on $4.7 billion in sales last year. The good news came the day after the event finished, though the airline knew 2023 was a success long ago.
Avianca emerged from Chapter 11 bankruptcy protection in 2021 with a leaner, more simplified business model and appears to be turning the corner financially, a sign that the Colombian market is rebounding.
In his final earnings call as Avianca CEO in late 2023, Adrian Neuhauser said the “new business model is based on a cost-driven strategy [aimed at] driving higher load factors” with increased emphasis on point-to-point flying.
New CEO Frederico Pedreira, a speaker at Routes Americas in Bogotá, moved up from Deputy Chief Executive to President and CEO of Avianca on 1 January 2024, while Neuhauser, who oversaw the transition through Chapter 11, will stay with the company as Executive Vice Chairman of its board.
Avianca was named the number one on-time airline in the world by Cirium. Pedreira, who helped shepherd the airline through bankruptcy as Chief Financial Officer, called the award “a major milestone”.
Cost reduction
The carrier adopted the slogan “The Sky Belongs to Everyone” as it lowered its costs to broaden its appeal. Avianca gutted its domestic structure and costs plunged from 6.2 US cents per available seat mile to 3.8 cents.
Avianca has shrunk to eight subsidiaries after having 11 units in its pre-bankruptcy days. Structural changes, however, were easier to handle than changing the mindset of passengers who are used to bringing everything on board and receiving generous free meals on every flight.
“When we had to enforce baggage policies for passengers who had flown with us for a lifetime it was a huge shock,” Pedreira said. “That old Avianca doesn’t exist anymore.
“We needed a business model to serve the basic passenger who wants a short flight with only a carry-on bag,” Pedreira said. “We have a competitive low-cost narrowbody network and a profitable long-haul business.”
Avianca recently announced new nonstop flights from Bogotá to Paris and Havana. “We’ve added some secondary cities in the US and we have a couple more on our bucket list,” he added.
As it emerged from bankruptcy, Avianca knew it needed to compete internationally. The airline added 20 point-to-point routes to markets like Quito and from Cartagena to São Paulo. It will face complexities such as the requirement that Colombian flights be flown by Colombian pilots, and Peruvian flights by Peruvian pilots.
Undeterred, Pedreira is hopeful the airline can expand into Argentina as well. “We heard a lot of desire by Argentina to open the skies. They will change very fast if all they want to do happens.”
