Bankrupt Avianca paid bosses millions after furloughing employees

25/09/2020

Airline Avianca Holdings came under broad criticism in Colombia for paying its top two executives US$6 million in bonuses in May, at a time when the carrier had furloughed most of its employees without pay and was preparing a bankruptcy filing.

According to bankruptcy court documents submitted by Avianca itself, the airline paid chief executive Anco van der Werff US$3.7 million and paid chief financial officer Adrian Neuhauser US$2.8 million on May 6.

Five days later, the airline filed for Chapter 11 bankruptcy protection in the US.

“Avianca is facing the most challenging crisis in our 100-year history,” van der Werff said at the time.

On Wednesday, Avianca defended the bonuses, saying they were necessary “as an incentive for the company’s management team to continue to provide services to Avianca”

In court filings, it also said its key executives would have sought employment elsewhere without the extra pay.

During the pandemic, Avianca took more radical payroll cutting measures than its rivals, asking the majority of its 20,000 employees to take unpaid leaves.

Its main rival LATAM Airlines Group slashed employees by half instead.

Avianca and most Latin American airlines have not received government bailouts like their peers in the US or Europe, whose governments have mandated that executives forfeit bonuses in exchange for aid.

Colombia’s government has, however, proposed a loan of more than US$300 million to help get Avianca out of bankruptcy.

Airlive