Sunday , January 17 2021

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



The departure, on Friday, of 226 Avianca Holdings employees is the latest fact of the strong adjustment on the route of this Colombian airline.
The day before, he announced a 15 percent reduction in labor costs in all of his subsidiaries and the sale of a portion of business such as Deprisa.

These facts are added to the changes in the itineraries, passing the flights at dawn; the loss of market share after the driver's strike a year ago, and the wait for the alliance with United United and the Panama Cup, announced 21 months ago.

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

Experts believe that the rise in the price of the dollar, along with that of fuel this year, precipitated the decision of the fund.

The exit of the more than 200 employees held between Thursday and Friday (see chart) is the first step, it is part of the offer of retirement plans and offers a bonus for people who are welcome as well as a training process make the career transition.

"It makes sense for Avianca Holdings to improve their numbers and ease the cost structure as it affects the establishment of tariffs," explains Gilberto Salcedo Ribero
, specialist in the aeronautical sector.

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

And is that after completing a year on Monday, and still not recovering from the strong effects of the 2017 pilot strike in its operation in Colombia, which forced at the time also to leave on land more than 40 aircraft in Colombia The company accumulated a drop of 7.84% in the number of local travelers mobilized between January and September compared to the same period last year, with 792,783 fewer people.

Although routes different from those that pass through Bogotá – those most affected by the pilots' strike – have returned to normal, and in some of them the number of weekly frequencies has increased.
Compared to August 2017, month before the start of the termination, there are changes in the airline's plan.

For example, in late October, he made the controversial decision to change the flight time from Barranquilla-Miami, which went from 10:54 a. m. at 3:19 a.m. m.

In addition, the organization unveiled its balance sheet through September and indicated that it went from a profit of $ 67.3 million in the first nine months of 2017 to a red balance of close to $ 18 million in the same period. 2018.

It makes sense for the company to improve its numbers and ease the cost structure as it affects the establishment of fees

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In addition, Avianca Holdings announced on Thursday an administrative reorganization with the objective of obtaining 100 million dollars, which includes the sale of part of Deprisa and other assets.

"The sale of some business units can generate additional revenues and improve their cash flow for a possible debt repayment," says Claudia Velásquez Castaña, an aeronautical consultant. It also considers that this reduces the risks of investment in related businesses, which certainly do not have stable income.

Similarly, the expert says that although the measures of the last days aim to improve competitiveness, leave the company in good condition before the possible arrival of a new partner.

In addition, Avianca Holdings has confirmed that it is still in negotiations with the manufacturers to delay applications to incorporate new aircraft from 2020, which will reduce its financing needs by approximately $ 1 billion.

"The high levels of leverage and tight liquidity that have forced the company to renegotiate aircraft delivery remain a concern," he said.
said the Brokerage House.

Regarding the alliance with United United, to which the Panama Cup would be added, Avianca's financial vice president, Roberto Held, said that "it is something more complex to manage and review carefully, because they are very long-term relationships and a wedding. " for the future ".

Gilberto Salcedo, a specialist in aeronautics, adds that the industry is high-income, but also with higher costs. "For example, at the global level, profit margins on income (if any) do not exceed 2%," he explains.

They start voluntary retreats

The 15% cut in Avianca Holdings labor costs began on Friday in 27 countries where the company is present. This is how 226 people (80 in Colombia) have already accepted a voluntary retirement plan.

The company also notified the retirement market of Gerardo Grajales López, vice president of Business Units, who will leave the position in the first quarter (February), in an independent process for the retirement plan and that had already been agreed with the guidelines . It was known that Miguel Montoya, president-president of Engineering and Maintenance and Eduardo Asmar, vice president of Strategy, would be in a similar stage.. After the cut in the administrative part, for February the same would be done with personnel of the operative area in several countries.

ECONOMY AND BUSINESS


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