- During the last quarter of 2019, the company renegotiated its debt and leases obligations successfully, reached agreements with key suppliers and completed funding of US$ 375 million convertible loans.
- Following a disciplined financial reprofiling process - part of the Avianca 2021 plan - US$ 2.6billion in debt were reclassified from short to long term, further KPMG eliminated the Going concern qualification of Avianca Holdings
- During the fourth quarter, Avianca reduced its total adjusted operating costs by 9.7%, and the its unit cost - excluding fuel - by 2.8%, in line with the cancellation of 27 unprofitable routes.
- The airline transported 7.4 million passengers during the last quarter of 2019 and closed the year transporting more than 30.5 million.
Bogota, February 28, 2020. The last year proved to be very challenging and complex for Avianca Holdings, in addition to changes in leadership, and an extensive financial reprofiling the company designed its new strategic Avianca 2021 plan which transitions the company from a growth to a profitability focused business model. Today the company presented its financial results for the fourth quarter and full year 2019 results, adjusted for one-time events in relation to the execution of the Avianca 2021 plan.
The final results were affected mostly by write offs in regard to selling 24 aircraft, an increase in professional and advisory fees due to the implementation of the Avianca 2021 plan, as well as other charges that resulted in a net loss of USD 894 million for the year. It is important to note that the aforementioned impacts represent non-recurring event and not necessarily imply a negative cash impact. In fact, excluding one-time events, results for the fourth quarter show improvements in line with the implementation of the Avianca 2021 strategic plan.
Anko van der Werff, Executive President and CEO, said: “The last couple of months have been very demanding and challenging, but they allowed us to confirm that a change in the business strategy was necessary. Our partners, suppliers and customers who trust in our company, enabled us to successfully close this year and reassure Avianca’s future. The results we present today are in line with our expectations and allow us to turn the page and focus on achieving improved profitability, providing better service and focusing on our employees”.
On his part, Adrian Neuhauser CFO of Avianca Holdings affirmed: “2019 was a very difficult year, we incurred extraordinary costs in relation to the implementation of the Avianca 2021 plan, such as the phase out of certain aircraft which had a significant impact on our results, as well as an increase in professional fees and advisory expenses associated with transformation process. However, we have to acknowledge that the bond exchange as well as the financial reprofiling concluded successfully- This will allows us to focus on strengthening Avianca’s financial position in 2020 and 2021, as well as on improving our liquidity and deliver positive results to our stakeholders.”.
2019 fourth quarter results:
- The airline transported 7.4 million passengers during the fourth quarter, with a majority of passengers traveling through Colombia, El Salvador, the United States, Peru and Ecuador. The load factor was 80.1%.
- Adjusted CASK-ex fuel declined by 2.8% in the fourth quarter of 2019, reaching 5.9 cents, the lowest unit cost since 2013.
- Adjusted Operating Profit of the quarter was US$ 98.5 million, with an adjusted EBIT margin of 8.4%, a 23-basis points year on year increase.
- Adjusted Revenues contracted -9.5%, explained by a reduction in capacity as well as a contraction in average fares due to a slow macroeconomic environment in the region and weakness of local currencies.
- Adjusted Operating expenses decreased 9.7% in line with the implementation of with process simplifications and right sizing of the company.
- Capacity, measured in ASK decreased 6.9% during the fourth quarter of this year. We expect capacity to continue to decrease in 2020, in line with the fleet simplification strategy and adjustments to the network.
- Successful bond exchange: In November Avianca successfully closed its bond exchange with a total of 88.1% bonds tendered, extending their maturity until 2023.
- Financing of US$ 365 million: Avianca drew the US$ 250 million stakeholder loan from United Airlines and Kingsland Holdings, as well as an additional US$ 125 million from other market players.
- Fleet Negotiation Agreements: Agreements with aircraft manufacturers were reached, reducing future aircraft commitments from 108 to 88 aircraft.
Consolidated 2019 results:
- The airline transported 30.5 million passengers in 2019, maintaining the number of transported passengers stable, despite significantly reducing its fleet and implementing network adjustments. The load factor was 81,5%.
- Adjusted CASK-ex fuel declined 4.0%, reaching 6 cents, in line with the company’s cost saving initiatives.
- Adjusted Operating Profit for the year was US$ 181 million, with an adjusted EBIT margin of 4.0%.
- Total adjusted operating income decreased 5.1%, mainly due to the reduction of deployed capacity and the contraction of the average fare as a result of a slow macroeconomic environment in the region and the weakness in local currencies.
- Operating expenses decreased 1.9% due to the implementation cost saving initiatives and process simplification.
- Capacity measured in ASK increased by 1.8% year over year.
- Elimination of Going Concern Qualification Avianca reclassified US$ 2.6 billion of short-term debt to long term debt. Further KPMG eliminated Avianca’s going concern qualification
- Fleet simplification and sale: 10 Airbus A318 and four A320’s were sold for net cash proceeds of USD in addition to 10 Embraer E190 aircraft which were sold at the beginning of 2020.
- Network Redesign: The company closed the year, operating more than 130 routes to 75 destinations and 26 countries, while redesigning Avianca’s network strengthening connectivity and focusing on better-performing routes.
- Branded Fares: The “Tailor-made Flights” fare model was launched in the domestic markets of Ecuador and Colombia, offering a customized choice for each type of traveler. This model has as well been implemented on flights to and from Europe and will continue to expand in international markets during 2020.
- Better operating indicators: Itinerary compliance was 98.7% and the percentage of irregularities in baggage was reduced, which improved customer satisfaction by 6 points, thanks to the implementation of customer-oriented plans. Punctuality for the year closed five percentage points higher than the previous year.
- APEX 2020 Award: Avianca was awarded the APEX 2020 award as “Best Airline in South America” as one of the only 5-star airlines in the world.
The profitability model will continue to be the center of our strategy for 2020 and it will focus on four pillars: the customer, financial strength, operational excellence and Avianca’s people.
- Customer: 2020 will be a year to redesign and strengthen our product and the experience, mainly at the route level. The implementation of the “Tailor-made Flights”, the densification strategy and adjustments to the loyalty program seek to reward the airline’s most loyal travelers.
- Financial strengthening: Strengthening of operating margins, disciplined capital investments and improving cash flow are priorities to reach adequate leverage levels. We will also continue to work on reducing our debt with projects such as the fleet simplification.
- Operational excellency: The key project is the optimization of the Bogota and San Salvador hubs, activation of the fleet simplification plan to attain efficiencies, and continuous improvements of the punctuality and baggage handling indicators.
- Avianca’s People: our more than 20.000 employees constitute the fourth pillar, focusing on a corporate culture, evolving to a mindset that centers on best practices and transforming groups of colleagues into a single team is key to fulfill the plan.