SAO PAULO, Jan 11 (Reuters) - Lessor Aircastle is set to repossess 10 jets from Avianca Brasil, the country's No. 4 airline, after a bankruptcy hearing on Monday, a source familiar with the matter said, potentially disrupting flights for thousands of passengers.
The 10 Airbus A320 planes represent more than 20 percent of Avianca Brasil's current fleet, according to data provided by Brazil's aviation regulator, raising doubts about the carrier's ability to fly its full flight schedule if the aircraft are seized.
And it could lose more planes in the future. Lessor GE Capital Aviation Services and an affiliate are seeking to repossess 12 Airbus A320s from Avianca Brasil, according to James Luton, a GE spokesman.
When the airline filed for bankruptcy protections last month, the airline discussed the possible loss of 14 planes, which it said would affect 77,000 passengers over a three-week period.
A representative for Avianca Brasil declined to comment. The bankruptcy filing came after years of mounting losses and late aircraft payments.
Bankruptcy filings, while providing protection from creditors, do not cover leases, the source of the carrier's entire 46-aircraft fleet.
Between the end of 2016 and September 2018, Avianca Brasil's liabilities to aircraft lessors quintupled to 415 million reais ($112 million), according to the carrier's financial statements.
Still, a Brazilian bankruptcy judge stayed a decision that would have allowed Aircastle to repossess the planes last month. That stay, however, expires on Monday.
Since the stay was issued, the source said, Avianca Brasil has not made any proposal to Aircastle that would have allowed the carrier to keep the planes. Avianca Brasil owes Aircastle more than $30 million, the source added.
The stakes are also high for Aircastle, as Avianca Brasil is its largest single customer, representing some 7 percent of its net book value, according to the lessor's financial disclosures.
Avianca Brasil is separate from the better-known Avianca Holdings SA, which is based in Colombia. But they share the same owner, a family company owned in part by Bolivian-born airline entrepreneur German Efromovich.
United Continental Holdings gave the family company a $500 million loan last November.
Neither party has revealed why the loan was needed, but Efromovich has been sued for failure to repay his debts in the United States and Brazil in recent years. ($1 = 3.7138 reais) (Reporting by Marcelo Rochabrun)