Tuesday , June 22 2021

Avianca makes corrections on the route to improve its competitiveness – Companies – Economy

The departure on Friday of 226 employees of Avianca Holdings is the latest fact of a strong correction of the route of this Colombian airline.
A day earlier, he announced a 15 percent reduction in labor costs in all of its subsidiaries and the sale of some companies, such as Deprisa

These facts are added to changes in travel plans, passing flights at dawn; loss of market share, after hitting the pilot a year ago, and waiting for the implementation of the alliance with United United and the Panamanian Cup, which was announced 21 months ago.

What leads to the adjustment of the company's direction, in the middle of this panorama?

Experts believe that the rising price of the dollar, along with the price of fuel this year, accelerated the decision on the fund.

The departure of over 200 employees carried out from Thursday to Friday (see box) is the first step and is part of the retirement plan offer and provides a bonus for people who are welcome, as well as a training process for making a career change.

"It makes sense for Avianca Holdings to improve its number and to mitigate the cost structure because it affects bidding," explains Gilberto Salcedo Ribero
, expert in the aviation sector.

The analyst adds that "traditional companies like Avianca have a challenge to compete with low-cost companies, and these measures also tend to improve their competitive position on the routes they serve."

And that is, after the end of the year on Monday and still not returning to the strong results of the pilot strike in 2017 in its operation in Colombia, which forced him to leave over 40 aircraft on land, in Colombia the company accumulated a fall of 7, 84 percent of the number of local tourists mobilized between January and September compared to the same period last year, with 792,783 fewer people.

Although the different routes of those who passed through Bogota – the pilots most struck by it – returned to normal, and in some of them the number of weekly frequencies increased.
Compared to August 2017, a month before the start of the suspension, there were changes to the plan of the airlines.

For example, at the end of October, he made a controversial decision to change the flight schedule of Barranquilla-Miami, which was past 10:54. m. at 3:19 a.m.

In addition, on Wednesday the organization disclosed its balance sheet reduced to September and indicated that of profit of $ 67.3 million in the first nine months of 2017. It reached a balance of almost 18 million in the same period of 2018.

It makes sense for the company to improve its number and soften the cost structure, because it affects the setting of rates

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In addition, Avianca Holdings announced an administrative reorganization on Thursday to obtain $ 100 million, which includes the sale of parts of Depris and other assets.

"Sales of some business units may generate additional income and increase cash flow due to the possible repayment of debt," says Claudia Velásquez Castaña, an aviation consultant. He also believes that this reduces the investment risk in related enterprises, which certainly do not have stable income.

Similarly, the expert claims that although the last days measures are aimed at improving competitiveness, leave the company in a good position before the final arrival of a new partner.

In addition, Avianca Holdings has confirmed that it is still negotiating with producers to postpone orders for new aircraft from 2020, which will reduce its financial needs by approximately $ 1,000 million.

"The high level of leverage and limited liquidity, which forced the company to renegotiate aircraft deliveries, are still a problem."
said Casa de Bolsa.

Regarding the alliance with United, to which Panama Copa will be added, Roberto Held, Avianca's vice president of finance, Roberto Held, said: "this is something more complicated to manage and analyze with caution, because it is a very long-term relationship and marriage to the future." .

Gilberto Salcedo, an aviation expert, adds that the industry has high incomes, but also higher costs. "For example, at the global level, profit margins (if any) do not exceed 2 percent," he explains.

They initiate a voluntary retreat

A 15 percent reduction in labor costs at Avianca Holdings began on Friday in the 27 countries where the company has its presence. In this way, 226 people (80 in Colombia) have already accepted a voluntary pension plan.

The company also announced the retirement market of Gerardo Grajales López, vice president of business units, who will leave the office in the first quarter (February) in an independent pension plan process that has already been agreed with the directives. It was known that Miguel Montoya, chairman of Engineering and Maintenance and Eduardo Asmar, Vice President of Strategy, will be at a similar stage., After cutting in the administrative part, in February, the same would be done with the personnel of the operating area in several countries.


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