Monday , October 18 2021

Avianca makes adjustments on the way to improving its competitiveness – Business – Economics


The departure, on Friday, of 226 employees in the company Avianca Holdings is the latest fact of the strong alignment in the route of this Colombian airline.
One day earlier, he announced a reduction of 15 percent of labor costs in all of its subsidiaries and the sale of a number of companies such as Deprisa

These facts are added to changes in travel plans, passing flights at dawn. the loss of market share, after the pilot battle a year ago, and awaiting the realization of the United United and Panamanian Cup alliance, announced 21 months ago.

What leads to the alignment of the company's direction, in the midst of the panorama?

Experts believe that the rising price of the dollar, along with fuel this year, precipitated the decision on funds.

The departure of the over 200 employees performed between Thursday and Friday (see box) is the first step and is part of the offer of pension plans and provides a bonus for the welcome people as well as a training process for making the career transition.

"It is sensible for Avianca Holdings to improve their figures and ease the cost structure as it affects the setting of tax rates," explains Gilberto Salcedo Ribero
, expert in the aviation industry.

Analysts add that "traditional companies like Avianca are challenged to compete with low cost companies, and these actions also tend to improve their competitiveness on the lines they earn."

And that is after finishing a year on Monday and still not recovering from the strong effects of the 2017 pilot strike in its operations in Colombia, which forced it to leave more than 40 aircraft in Colombia, in Colombia, the company accumulated a fall of 7.84 percent in the number of local travelers mobilized between January and September compared with the same period last year, with 792,783 fewer people.

Although the different paths of those passing Bogota – those who suffered most of the pilot's strike – returned to normal, and in some of them the number of weekly rates increased.
Compared to August 2017, the month before expiry, there are changes in the airline's plan.

For example, at the end of October, he took the controversial decision to change the schedule for the Barranquilla-Miami flight, which went from 10:54 am to 3:19 pm.

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

It makes sense for the company to improve its figures and ease the cost structure as it affects the setting of tax rates

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In addition, Avianca Holding announced Thursday an administrative reorganization aiming to receive $ 100 million, including the sale of a portion of Deprisa and other assets.

"Selling certain business units can generate additional revenue and improve cash flow for a possible debt payment," said Claudia Velásquez Castaña, air consultant. It also believes that this reduces investment risks in related companies, which certainly does not have a stable income.

In the same way, the expert says that, although the actions of recent days aim at improving competitiveness, leave the company in a good position before any new partner arrives.

In addition, Avianca Holdings confirmed that there are still negotiations with manufacturers to postpone orders to incorporate new aircraft from 2020, which makes it possible to reduce their funding needs by approximately $ 1000 million.

"The high leverage effect and the tight liquidity that forced the company to renegotiate the delivery of aircraft continues to be a problem"
said Casa de Bolsa.

As for the United Nations Alliance, to which Panamanian Copa was added, the Director of Finance of Avianca, Roberto Held, held that "it is somewhat more complicated to handle and examine carefully because they are very long-term relationships and a marriage to the future."

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

They initiate voluntary retreats

Avianca Holding's 15 percent working expenses began Friday in 27 countries where the company has a presence. So, 226 people (80 in Colombia) have already accepted a voluntary pension plan.

The company also announced the retirement market of Gerardo Grajales López, vice president of business units, leaving offices in the first quarter (February), in an independent process to the pension plan, which had already been agreed with the directives. It was known that Miguel Montoya, chief of technology and maintenance, and Eduardo Asmar, vice president of strategy, should be at a similar stage.. Following the cuts in the administrative section, by February, the same would be done with the staff in the operational area in several countries.


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