‘Avianca is not going to die in my hands,’ says its new president

Anko van der Werff says the company will be reinvented and the debt will be refinanced.

Avianca reduces its size. He does not die. Avianca will refinance its debt. It does not break. Avianca will sell part of its planes. It will retain a fleet of more than 100 aircraft. Avianca cancels unprofitable routes. It will create others with a better future.

It is safe a financial agreement to extend that debt with the banks, 3 more years. Avianca has reduced service to its customers. It will be improved. Avianca reduced the food. "Bread will return to breakfast." On Avianca's planes it's cold. There will be better and bigger blankets. There will be wine. And you can sleep well.

All these details of what will be the future of Avianca makes them in the following interview Anko van der Werff, new president and CEO of the company. He is Dutch and has an outstanding career in the airline industry. His last position was that of the financial vice president of Aeromexico. He was senior vice president at Qatar Airways. And he led commercial strategies for Air France-KLM in England and Ireland. He has 45 years and degrees in Law and Business from the University of Leiden, in the Netherlands, and Harvard.

What is the situation of Avianca?

Avianca's reinvention plan is underway. We go through complicated moments in the company; We have grown rapidly for several years, we have a large and complex fleet and we have to transform.

Why do you say that the current moment is complicated?

We were growing at a level of 8 to 9% for many years, making strong investments in airplanes, new routes, technology, and that accelerated growth impacts the result. Growth has declined and has become negative.

Will the last quarter of this year also be negative?

This year will be negative. Next year we will have a positive trend. In 2021 we will have absolutely positive results.

Why did you go from growing to a negative balance in such a short time?

Because we couldn't stand the overflowing growth. And the current financial situation imposes restrictive measures. We have to be very clear on that.

Was there a kind of oversizing of the company?

Yes. I think he acted with too much ambition, out of the ordinary.

How many planes does Avianca have today?

At this time, planes of the entire holding, including cargo, around 180. Of those, flying 168. The remaining are planes that are for sale.

How many own?

Twelve. In operating leasing, 53.

And in financial leasing?

Hundred three.

Are they going to return planes?

Yes. Twenty four. At the end of 2019 we expect to have 156 planes. We do not need more than that for our operation. The small airplanes Airbus 318 and the Embraer 190 are leaving, we have already sold them. There were 15 Cessna 208 and ATR 42 aircraft … But it is not enough. You have to sell more. There will be complicated decisions to simplify the fleet, we have too many long-range airplanes, large airplanes.

Boeing 787, how many does Avianca have?

Thirteen. On the total long range fleet, we will review how many are needed.

Does the reduction of the fleet also mean reduction of flight frequencies?

Yes. One of the pillars of the Avianca 2021 transformation is the adjustment of our network. This year we have canceled 25 unprofitable routes. For example, in Peru we already eliminate domestic routes. They are never easy decisions, but it was not profitable.

In Ecuador, where there is also internal service, is it also over?

No. Ecuador is still normal, it is a good, healthy operation. Like Bogotá. We will strengthen the operations center here in Bogotá. But we need the Government, the dealers, the Aerocivil. The strengthening of Bogotá as a 'hub' of the Americas is a decision taken.

Does this statement assume that there will be no decrease in national frequencies?

The entire route network is being redesigned.

Won't they alter national frequencies?

Very slightly. For example, we are seeing if instead of having 31 daily frequencies to Medellin we could reduce a pair. And use that plane to give Colombians connectivity to Canada, to say the least, with a flight to Toronto.

Will they open frequency to Toronto?

It's possible. And to other beautiful cities in the United States: San Francisco, for example. Washington is maintained, New York is maintained; obviously Miami. Fort Lauderdale. We are seeing if we can increase capacity to Florida.

So the situation is not so chaotic?

Well, cold mind. Latin Americans are exceptionally friendly, warm, wonderful, but sometimes very emotional. For now, cold mind. I met with President Duque, with President Alvarado, of Costa Rica. The two, very warm people, who recognize the importance of having good air connectivity.

Who appointed you president of Avianca?

Germán Efromovich started the process. I had conversations with him; A few days after the events of May 25, when Germán left, we talked about the new situation. I asked him if the position was different now, and he replied: ‘I do believe that you are the right and fair person for the challenge; I think you will find a family in Avianca that is very open for you; and if you can finish your negotiations with the new team, go ahead.

And who did he keep talking to?

With the board of directors, with Kingsland.

How do you understand then that Mr. Kriete, president of the board of directors of Avianca, says publicly that Avianca is broken?

It was a very unfortunate term; Unfortunate and complicated. But I also believe that he was referring to the plight of the company and the efforts we are making to move forward.

What did Kriete mean by saying what he said?

His intention was to convey the sense of urgency.

Total debt is about $ 5 billion, including the capitalized value of aircraft leases

Avianca's first major financial obligations expire in May. Is it possible that they are refinanced, extended?

Completely possible. We seek to change short-term and long-term debt.

Are creditors willing to extend terms?

The conversations have been very productive.

With higher interest rates?

No, it is almost a continuation, but in a longer term.

A high debt expires in 2020, what year do they ask to extend it?

By 2023: an extension of three years, which is a very important step.

If the deadline is extended, would Avianca be totally safe?

I see it this way: my dad is going to turn 80; He went to the doctor, and the doctor said: ire Look, sir: you have to eat less meat, less fat, more vegetables, suddenly take care of your weight; He has to walk more, play more sports, and get ready to live a hundred years. Avianca will be 100 years old in four months. And with the ‘medicines’ lists, you will live many more.

But he will be one hundred years old at the worst time …

No no. This is a very good time; good time to take the pulse of the organization, simplify the fleet, listen to customers; the world is changing, and we have to reinvent ourselves; the future is now, and that is what we are doing; We have a new CFO, Adrián Neuhauser, who is already one of my best friends.

How much does Avianca owe?

Total debt is about $ 5 billion, including the capitalized value of aircraft leases. Perfectly approachable under the plan we have proposed for reperfilamiento and extension of margins.

What is the formula of salvation?

Refinance the debt, simplify the fleet; leave unprofitable routes, businesses that are not strategic, and focus on service, on the client, on raising the level.

Does all this mean an impoverishment of the company?

It is to have an Avianca provided, with the fleet you need to operate, with the routes that customers demand and are profitable …

Will there be staff reduction?

The company is reinventing itself, we are working increasingly for processes, eliminating silos, work islands. I am convinced that the hierarchy is not important, the important thing is who does it well, with passion and commitment. We always check the structures that are needed to operate. Normal exercise

What are not profitable routes?

We have suspended 25 unprofitable routes, mostly in markets such as Peru and Central America. Several international routes from Lima have been suspended. And suspended the entire national operation.

And the Colombian routes that today cover the old territories or places like Tumaco, Tame, Florencia, Ibagué, Leticia, Quibdó?

We have a regional airline that connects cities without having to go through Bogotá; It is Regional Express Americas, which is part of Avianca Holdings, with small ATR aircraft. We will continue to do so.

But you are not pessimistic about debt renegotiation?

No, that's why they hired Adrian and me; I say it without pride; This is our job, let's get ahead; What all the rest of the company has to do is focus on customers, that's why we make the decision to think about service. We will increase food, blankets, all services.

You must have renegotiated the debt before May …

No, no, we hope that before May, this year should end the year. On September 11 we will have the final closure, at 12 p. m., and there is good perspective. Believe me: we will solve the debt issue.

United and Kingsland reported that the participation to date of the bond exchange offer is not enough for them to finance the new investment proposal in Avianca, up to 250 million dollars …

The disbursement does not depend solely on the bonus: they are the combination of the exchange offer, plus the conversations with strategic allies.

So there is a time limit?

For the closing of the bond exchange offer, yes, and it is September 11.

In order to refinance the debt …

To tell us yes or no. For bondholders to decide if they participate or not. The process of negotiations with allies is still ongoing.

And the request for consent?

Obviously, the bondholders have their rights and their current bonds; they have to give us their consent to extend or exchange, to allow that debt to be long term.

Does Avianca have creditors and suppliers today?

Yes.

Is the situation with both good?

So much that it gives us the reason to think that we are going to get out of the situation well.

Is Avianca not going to die at your fingertips?

Do not.

What drives you to be so confident?

Because I see the market, I see the Avianca family, I see the collaborators; I see the commitment, I see this country that loves this company. Avianca will reduce its size, but it will not disappear. Avianca will never disappear, we will live another 100 years and, rethink, reinvent itself, for the next 100 years.

If you needed special help to get ahead, before 12 pm on September 11, what would it be?

I personally would like more hours in the day, to be able to call my family.