Avianca seeks to cut Airbus order as much as half: CEO

BOGOTA (Reuters) - Airline Avianca Holdings SA AVT_p.CN will begin negotiations with Airbus AIR.PA to reduce the 100 planes it had agreed to purchase in a 2015 deal to as few as 50, the chief executive of the Latin American company said.

FILE PHOTO: Hernan Rincon, executive president and CEO of AVIANCA Holdings S.A., speaks during a new aircraft presentation ceremony at Monsignor Oscar Arnulfo Romero International Airport in San Luis Talpa, El Salvador May 7, 2018. REUTERS/Jose Cabezas

Avianca was also seeking a strategic alliance with German airline Lufthansa LHAG.DE, CEO Hernan Rincon said late on Sunday, part of its bid to expand in Europe.

Avianca representatives will travel to France in the coming days for re-negotiations with Airbus, Rincon said. Avianca had agreed to buy 100 A320neo planes to modernize its fleet.

“Of those 100, we’ll probably receive between 50 and 80 planes,” he said. “We don’t have any doubt that we will keep growing, what has changed is the rhythm of the growth.”

Technological advancement is part of the reason for the airline wanting to reduce its purchases, Rincon added.

“The rhythm of technology is changing, it will take a while to get all of the order and we don’t want to have a commitment to planes with today’s technology which will be received by us in 10 or 15 years,” he said.

A reduction in the original order, which was set to cost $10 billion, will also give Avianca some financial breathing room, Rincon added.

At the end of last month Avianca, United Continental Holdings Inc UAL.O and Copa Airlines of Panama said they had finalized a three-way joint venture that will allow them to plan routes and fares together and share revenues on those routes.

United, Avianca and Copa are already codeshare partners and Star Alliance members.

“We’ve started conversations with Lufthansa, but its very embryonic,” said Rincon. “We hope to reach an agreement to benefit our passengers in Europe, which is a relevant and growing market.”

The deal with Lufthansa would be similar to the one just agreed with United and Copa, Rincon added.

Under the United and Copa agreement, United said it would provide a $456 million term loan to cash-strapped Avianca’s top shareholder, Synergy Group Corp. Loss-making Avianca has a roughly $4 billion debt pile, of which 40 percent is due within the next two years, according to recent financial statements.

That deal still has to be approved by regulators.

Avianca will also start operating a regional subsidiary in Colombia in 2019, meant to serve medium and small-sized cities with 12 ATR 42 planes. The planes are already part of Avianca’s fleet, Rincon said.

Reporting by Luis Jaime Acosta; Writing by Julia Symmes Cobb; Editing by Helen Murphy and Marguerita Choy