LONDON – The Colombian courts have blocked Avianca’s (AV) loan of $370m. Whilst it has been blocked, there are still grounds for an appeal. The lawsuit came from a Colombian citizen, who urged the loan to be blocked.

According to Finance Colombia, the reasons surrounding such a block of finances is due to a plethora of reasons. First off, it presented threats to public resources, as bankruptcy proceedings, as we have seen with the Chapter 11 Bankruptcy AV took part in, does not provide guarantees about assets being safe.

Colombian President Ivan Duque with Avianca CEO Anko Van Der Werff (Courtesy Presidencia de la República)

Due Diligence & Preferable Treatment

It is also understood that a potential conflict of interest has come about regarding the loan initially. The President of Colombia, Iván Duque Márquez, has a sister who is a senior executive at airline.

On the grounds that Márquez’s sister is on the board at AV, it brings up some more questions behind the loan handout. The first is around due diligence conducted.

It has been revealed that the firm that was appointed to produce a study about the airline was hired the night before the financing had actually been announced.

Photo: Wikimedia Commons

COVID-19 Not a Valid Reason

On top of this, such structures in Colombia meant the lawsuit took a different direction. It alleges that because the airline has been in a financial downturn since before the pandemic, the virus is not a valid reason to finance the airline.

The argument stated that AV may have been given preferential treatment over airlines such as VivaAir (VH), EasyFly (VE), and LATAM Colombia (4C).

Photo: Wikimedia Commons

The Next Steps

An appeal has not been made by AV, but it will no doubt follow over the coming days and weeks. It will ultimately be interesting to see how the courts respond to the appeal, and whether such a ruling will be easily overturned.

The focus of those in the lawsuit will definitely be the due diligence and potential conflict of interest, especially if the Colombian Government should have done more to offer bailouts to other airlines operating in the country.

Photo: Wikimedia Commons

Avianca International Operations

Meanwhile, after more than six months without operations due to the COVID-19 pandemic, AV has announced it is ready to resume its flights from its El Salvador hub on 19 September, once the authorities allow international flights to arrive and depart for the country.

The airline plans to reach nine destinations with the highest demand in Central and North America, according to its initial connectivity strategy. The carrier will use an Airbus A319 and A320 fleet with 120 and 150 passenger capacity, respectively.

The airline will offer round trip flights in Central America from San Salvador to Guatemala; San Pedro de Sula and Tegucigalpa, Honduras; and Managua, Nicaragua.

Additionally, the carrier will offer round trip flights to the US from San Salvador to Miami, Los Angeles, New York, Washington, and San Francisco; and from Managua, Nicaragua to Miami.

Featured Image: Avianca Boeing 787 Dreamliner. Photo Credit: Wikimedia Commons