Brazil’s fourth-largest airline, (loss-making) Avianca Brasil, has filed for bankruptcy protection​ after aircraft leasing companies initiated preparations to begin repossessing some of Avianca Brasil’s airline jets — a move which would threaten its current passenger operations.

Avianca Brazil (officially called Oceanair Linhas Aéreas) has struggled financially for several years, while attempting to compete with larger airline rivals LATAM Airlines, Gol Linhas Aereas, and Azul — as well as U.S. carriers, including American Airlines and Delta.

The Brazilian airline currently flies to around 25 destinations from its main bases, Brasília International Airport, and São Paulo-Guarulhos International Airport.

Given that Avianca Brasil leases 50 of its fleet of 58 aircraft (made up of Airbus A320 family aircraft, and Airbus A330s), over the last week, the Brazilian carrier has been working with lessors (airline jet leasing companies) to potentially reach agreements on revisions to leasing contracts, amid the worsening state of Avianca Brasil’s financials — but Avianca Brasil’s lack of monthly lease payments for aircraft that continue to carry passengers has led to repossession preparations — thus triggering the Brazilian airline to file for bankruptcy protection.

Shares in Avianca’s parent company were down more than 20% following the company’s decision to file for bankruptcy protection. Avianca Brasil is independent to the better-known Avianca (of Colombia), but the airline does share the same owner — causing the share price to fall sharply at the Colombian holding company, before recovering later in the day.

Earlier this week, I tweeted how Avianca Brasil is now preparing to negotiate reducing its existing A320neo order with Airbus, from 100 jets (the largest aircraft order in Latin American aviation history) to at least 50 aircraft.

Latest: Avianca will begin negotiations with Airbus to reduce it’s order for 100 #A320neo family aircraft, to as little as 50 aircraft.

Avianca’s order was the largest single order ever made in Latin American aviation history…😬 pic.twitter.com/Xj6qqkBOJ9

— Alex Macheras (@AlexInAir) December 10, 2018

But following today’s announcement, Airbus could face more cancellations than previously expected.

Final Thought

Going forward, Avianca Brasil will soon announce its intentions for its future operations, while proceeding with Brazilian bankruptcy protection procedures, which do protect its day-to-day operations, for now.

The airline has struggled financially for multiple years, and a strategic review will be necessary if the carrier intends on retaining its Brazilian aviation market share.