Avianca made adjustments to the route to increase its competitiveness – the Company – Economy


Departure, on Friday, out of 226 Avianca Holdings company employees is the latest fact of the strong adjustments in this Colombian airline route.
The day before he announced a 15 percent reduction in labor costs in all of his subsidiaries and the sale of some businesses such as Deprisa

These facts added to changes in travel, passing flights at dawn; loss of market share, after a pilot strike a year ago, and awaiting the realization of an alliance with United United and Panamanian Cup, which were announced 21 months ago.

What causes adjustments to the company's direction, in the middle of the panorama?

Experts believe that the rise in dollar prices, along with fuel this year, accelerates funding decisions.

The departure of more than 200 employees carried out between Thursday and Friday (see box) is the first step, and is part of the offer of retirement plans and provides bonuses for people who are welcomed, as well as the training process for making career transitions.

"It makes sense for Avianca Holdings to increase the amount and lighten the cost structure because it affects tariff settings," explained Gilberto Salcedo Ribero
, an expert in the aeronautics sector.

Analysts added that "traditional companies like Avianca have the challenge of competing with low-cost companies, and these steps also tend to increase their competitive position on the routes they serve."

And that is that after completing one year on Monday, and still not recovered from the strong effects of the 2017 pilot attack on its operations in Colombia, which forced it at that time to leave on land more than 40 aircraft, in Colombia the Company collected a fall of 7 , 84 percent in 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 from those passing through Bogota – most affected by the pilot strike – returned to normal, and in some numbers the weekly frequency increased.
Compared to August 2017, a month before the start of the termination, there was a change in the airline's plan.

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

In addition, the organization revealed on Wednesday the balance sheet was cut through September and showed that it went from a profit of 67.3 million dollars in the first 9 months of 2017 to a red balance approaching 18 million in the same period in 2018.

It makes sense for companies to increase the amount and alleviate the cost structure because it affects tariff arrangements

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

"Selling multiple business units can generate additional income and increase their cash flow for possible debt payments," said Claudia Velásquez Castaña, an aeronautical consultant. He also considers that this reduces investment risk in related businesses, which certainly does not have stable income.

Similarly, experts say that even though today's steps aim to increase competitiveness, leave the company in a good situation before the arrival of a new partner.

In addition, Avianca Holdings confirmed that it was still in negotiations with producers to delay orders to enter new aircraft from 2020, which would allow it to reduce its financing needs by around 1,000 million dollars.

"The high level of leverage and tight liquidity that forces companies to renegotiate aircraft shipments continues to be a concern,"
said Casa de Bolsa.

Regarding the alliance with United United, where Panama Copa will be added, the financial vice president of Avianca, Roberto Held, stated that "it is something more complex to be managed and reviewed carefully because they are very long-term relationships and marriage into the future "

Gilberto Salcedo, an aeronautics expert, added that the industry had high income, but also higher costs. "For example, at the global level, the profit margin (if any) does not exceed 2 percent," he explained.

They started voluntary retreats

The 15 percent cut in Avianca Holdings & # 39; s labor costs starts Friday in 27 countries where the company has a presence. This is how 226 people (80 in Colombia) have received voluntary retirement plans.

The company also informed the market about the resignation of Gerardo Grajales López, vice president of the Business Unit, who would leave office in the first quarter (February), in an independent process for retirement plans and agreed upon directives. It is known that Miguel Montoya, president of the Engineering and Maintenance of ice, and Eduardo Asmar, vice president of Strategy, will be at the same stage.. After the cut in the administration section, towards February the same thing will be done with personnel from the operating area in several countries.



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