Thursday , October 6 2022

Avianca makes adjustments on track to improve its competitiveness – companies – economy


The departure, on Friday, of 226 employees of the company Avianca Holdings is the latest fact of a strong match in the route of the Colombian airline.
The day before he announced a 15 percent reduction in labor costs in all of its subsidiaries and the sale of some of the businesses such as Deprecia

These facts are added to changes in routes, flights passing at dawn; The loss of market share, after the pilot strike a year ago, and the wait for the realization of the alliance with the United Alliance and the Pan-Cup, which was announced 21 months ago.

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

Experts believe that the price increase of the dollar, along with that of gasoline this year, precipitated the decision of the Fund.

The departure of more than 200 employees made between Thursday and Friday (see box) is the first step, and is part of the proposal of retirement plans and provides a bonus to people who are welcomed as well as a training process for making the career transition.

"It makes sense for Avianca Holdings to improve their numbers and ease the cost structure because it affects the setting rates," explains Gilberto Salcedo Ribero
, An aviation expert.

"Traditional companies such as Avianca have a challenge to compete with low-cost companies, and these measures also tend to improve their competitive position in the routes they serve," he said.

And that is that after completing a year on Monday and still not recovering from the strong effects of the pilot's strike of 2017 in its operation in Colombia, which forced it at the same time also to leave on the ground more than 40 aircraft, Columbia Company has gained a 7.84 percent decrease in the number of domestic passengers recruited between January and September Compared to the same period last year, with 792,783 fewer people.

Although the various routes of those crossing through Bogota – those most affected by the pilots' strike – have returned to normal, and in some cases the number of weekly frequencies has increased.
Compared to August 2017, a month before the start of the break, there are changes in the airline's plan.

For example, in late October he made the controversial decision to change the flight schedule of Barranquilla-Miami, which has moved from 10:54 a. M. In 3:19 a. M.

In addition, the company unveiled its September balance sheet on Wednesday, citing a profit of $ 67.3 million in the first nine months of 2017, a red balance of nearly $ 18 million in the same period last year.

It makes sense for a company to improve their numbers and ease the cost structure because it affects setting rates

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In addition, Abianca Holdings announced on Thursday an administrative restructuring with a view to achieve $ 100 million, which includes the sale of part of the division and other assets.

"Selling some business units can generate additional income and improve their cash flow for possible debt payment," says Claudia Velásquez Castaña, an aeronautical consultant. It also sees that it reduces the investment risks in related businesses, which certainly has no stable income.

Similarly, the expert says that despite the measures of the last few days aimed at improving competitiveness, leaving the company in good shape before the eventual arrival of a new partner.

In addition, Apianca Holdings confirmed that it is still negotiating with the manufacturers to postpone orders for the introduction of new airplanes from 2020, which will enable it to reduce its financing needs by $ 1,000 million.

"The high levels of leverage and tight liquidity that have forced the company to rethink the supply of aircraft continue to be a concern."
Said Casa de Bolsa.

"This is a more complicated thing to manage and review carefully because they are very long-term relationships and marriage to the future," said Abeianca's vice president of finance, Roberto Hilde, referring to the alliance with the United Alliance to which the Panamanian fund will be added.

Gilberto Salcedo, an expert in aeronautics, adds that the industry is of high income but also of higher costs. "For example, at the global level, the profit margins on income (when there is) do not exceed 2%," he explains.

They initiate a voluntary withdrawal

The 15% cut in Avianca's labor costs began on Friday in 27 countries where the company has a presence. Thus 226 people (80 in Colombia) have already received a voluntary retirement program.

In addition, the company announced the retirement of Gareth Lopez, vice president of business units, who will leave the office in the first quarter of February, in an independent process for the retirement program, which has already been agreed upon. It was known that Miguel Montoya, the ice president of engineering and maintenance, and Eduardo Asmar, vice president of strategy, will be at a similar stage.. After the cut in the administrative section, towards February this will also be done with operational field personnel in several countries.

Economics and business

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