Fitch assigns B to Avianca

Fitch Ratings said it assigned long-term foreign- and local-currency issuer default ratings B to Avianca Group International Ltd. and to its loyalty program subsidiary, LifeMiles Ltd. The agency also assigned B/RR4 ratings to Avianca´s senior secured exit notes tranche A-1 and tranche A-2, total amount of $1.7 billion due 2028, issued by Avianca MidCo2 Ltd.

“Avianca's B rating reflects the industry's high cyclicality risks, the company's solid market position in the Latin American airline passenger industry, lean cost structure, moderate leverage, with net debt/adjusted EBITDA remaining in the range of 3x-4x within the rating horizon, and good liquidity position, yet limited financial flexibility,” Fitch said in a press release.

The agency estimates Avianca's adjusted EBITDA to hover around $1.2 billion in 2023 and $1.3 billion in 2024, an increase from $639 million in 2022 and $602 million during pre-pandemic 2019.

“Avianca's stronger operating cash flow generation is likely to be consumed by fleet modernization and ongoing business growth. Fitch forecasts Avianca's free cash flow generation to be neutral during 2023, but negative at $123 million in 2024 and $174 million in 2025 after increasing capex,” Fitch said.

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