SAO PAULO, April 23 (Reuters) - The financial auditors of Colombian airline Avianca Holdings have concluded that “substantial doubt” exists as to the company’s ability to stay in business due to the coronavirus crisis, the carrier said.
The disclosure was made in a securities filing on Thursday with the U.S. Securities and Exchange Commission explaining why Avianca was unable to file its 2019 annual report on time.
Avianca said it will file the report in June and expects to disclose the conclusion made by accounting firm KPMG that there were serious questions about the airline’s “ability to continue as a going concern.”
Avianca, Latin America’s second-largest airline, has grounded all its passenger flights since March due to the coronavirus crisis, after its main hubs in Colombia, El Salvador, Ecuador and Peru all shut down air traffic.
It has also put about half of its workforce on unpaid leave and is actively looking for government help, while deferring payments on aircraft leases and loan principals.
“As a result, we are currently in default under certain of our outstanding indebtedness,” the airline said in the securities filing. “If our operations remain suspended for an extended period, we may have to take further measures to preserve our business.”
The airline was already in weak shape before the crisis hit and required an emergency loan from United Airlines Holdings Inc in 2019 to cover its debts. Roberto Kriete, the president of Avianca’s board, said last year in a meeting with employees that the airline was “broke.”
Kriete was appointed in May of last year when United Airlines ousted Avianca’s former president and controlling shareholder, German Efromovich, when he himself defaulted on a $450 million loan he owed United.
That loan has yet to be repaid and is secured by the value of Avianca, whose New York-listed shares have fallen 77% this year.
Reporting by Marcelo Rochabrun; Editing by Steve Orlofsky