No one bid for the loyalty program of Avianca Brasil during Wednesday’s auction for seven pieces of the bankrupt airline’s assets, and Latam and Gol made their bids—totaling $147.3 million for its routes—contingent on the inclusion of Avianca’s slots. As civil aviation agency ANAC has said previously, it will redistribute those slots in line with regulations, a position that so far has been backed by the courts.

Each airline bid $70 million for one block of slots, as promised in the bankruptcy reorganization plan, and TAM bought one block at the $10,000 minimum and Gol another. A fierce bid for one block of daily early-morning Congonhas slots left Gol the victor at $7.3 million, and one block went unsold, like the loyalty plan.

Both Latam and Gol announced they would use their priority credits in the bankrupcy as partial payment. Each had made a no-recourse advance payment of $35 million to Avianca’s principal creditor, American investment group Elliot, as well as debtor-in-possession (DIP) loans of $13 million.

Brazil’s third largest airline, Azul, saw its offers of $106 million and then $143 million for part of Avianca’s operations spurned when Avianca’s right to the slots remained undisputed, and its partial survival seemed possible. Azul did not participate in the auction, saying in a note that it “did not believe in the legitimacy of the process.” Azul had also made a DIP loan of $13 million.

Discounting the credits from DIP loans and interest accumulated up to now and during the unpredictably prolonged legal wrangling over the slots, it remains unclear how much money the auction will finally yield to pay Avianca’s creditors, employees, and ticket holders. Azul had asked a court that the $70 million its competitors paid to Elliot be held in escrow, but the judge rejected the petition.

www.ainonline.com

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