Avianca says the Colombian government’s loan is confidence in the airline.

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Avianca Holdings stated this Sunday that the credit of 370 million dollars approved by the Colombian government, criticized by the opposition, is equivalent to 30% of the new resources of its financial restructuring plan and is a sign of confidence in the company.

The Ministry of Finance announced on Saturday that the administration committee of the Emergency Mitigation Fund (FOME) that manages the resources to confront the coronavirus pandemic, approved the loan to Avianca, under the figure of debtor in possession (DIP), in order to preserve the national air service.

“We are pleased with the Colombian Government’s announcement of its participation in the company’s DIP financing and we express our appreciation for the confidence and support that this loan demonstrates,” said Avianca Holdings in a statement.

Avianca filed for bankruptcy protection under the U.S. Bankruptcy Act last May to begin a financial reorganization process due to the negative impact of the COVID-19 crisis.


The company explained that the credit is an 18-month transaction and is part of an operation led by private market investors.

According to the company, Avianca’s DIP financing consists of two tranches that will add approximately 1.2 billion in new funds, as part of a total financing package of $2 billion, including the financing of “certain acquisitions and the refinancing of certain pre-existing debt.

The company said it will back the DIP loan with “a set of strategic assets of Avianca as collateral”, including its stake in LifeMiles, its cargo and cash accounts subsidiary, among others.

“In addition to the credit approved by FOME (…) we are pleased with the positive reception that the DIP loan structure has received from external institutional investors,” added Avianca Holdings.


However, the loan has been highly criticized by different sectors that consider that the Government of President Ivan Duque should invest those resources in thousands of small businesses that, like the airline, suffer millions of losses due to the economic paralysis caused by the pandemic.

“According to 300 experts from the world’s richest countries interviewed by (US economist Joseph) Stiglitz the worst policy that can be made in the world is to save airlines. It doesn’t generate jobs and it does cause a worsening of the climate crisis. Instead of Avianca the micro-SMEs, Duque,” said leftist Senator Gustavo Petro on his Twitter account.

Another senator, Ivan Marulanda, of the Green Party, said that “with the delivery of public money to the company Avianca the Duque Government is challenging the Colombian people.

The opposition also announced that it will summon the Minister of Finance, Alberto Carrasquilla, to a political control debate in Congress to explain the reasons for the loan.


In granting the loan, the Colombian government took into account that Avianca is the largest airline in the country, with a 45.5% share of the passenger market in 2019, according to the Ministry of Finance.

Avianca Holdings generates more than 21,000 direct and indirect jobs in Latin America, of which more than 14,000 are in Colombia, and works with a network of more than 3,000 suppliers.

The airline has a 31.6% share in the country’s cargo transportation and its operation represents approximately 14.6 trillion pesos (about 3,899 million dollars) per year for the Colombian economy, equivalent to 1.4% of the Gross Domestic Product (GDP).

The airline’s operations are integrated in Avianca Holdings, formed by the airlines Avianca and Tampa Cargo (Colombia), Aerogal (Ecuador) and the companies of the Taca International Airlines Group based in Central America and Peru.