By Ana Mano and Marcelo Rochabrun
SAO PAULO (Reuters) - Brazil's fourth-largest airline, Avianca Brasil, filed for bankruptcy protection on Monday, saying its operations had been threatened by potential repossession of aircraft, which could prevent the carrier from continuing to operate.
The unlisted airline said in its bankruptcy filing that leasing companies seeking to take back some 30 percent of its all-Airbus fleet threatened its ability to fly some 77,000 passengers in December.
Avianca said in a statement that the bankruptcy filing resulted from a failure to reach a "friendly agreement." It also said its flights would not be affected.
The aircraft are still under Avianca Brasil's control for now and it remains unclear what their fate will be as the carrier is asking a Brazilian court to allow it to keep the planes for now.
The airline said in the filing it largely blamed high fuel prices and a strong dollar for its troubles.
Latin American airlines, which have to pay a large part of their routine expenses - including fuel - in dollars while billing their customers in more volatile currencies such as Brazil's real and Argentina's peso, have struggled in general this year.
Avianca Brasil is owned by holding company Synergy Group, which also controls the better-known Avianca Holdings SA <AVT_p.CN>, a publicly listed airline based in Colombia. Still, the fate of one company is linked to the other.
Shares in Colombia's Avianca fell as much as 25 percent on the news before later paring losses to 2 percent. Shares in rivals Gol Linhas Aereas Inteligentes SA <GOLL4.SA> and Latam Airlines Group SA <LTM.SN> closed up 13 percent and 4 percent respectively.
The bankruptcy filing did not give information regarding Avianca Brasil's assets and liabilities. But it did say the carrier faces three lawsuits from aircraft lessors totaling 14 planes.
One lessor, Aircastle Ltd <AYR.N>, which was not mentioned in the bankruptcy filing, said late on Monday that it had terminated leases for 11 aircraft Avianca Brasil was flying and had begun "exercising remedies" to repossess them.
"Avianca Brasil has had issues, and many investors were expecting the company to renegotiate its leases," analysts at Cowen Equity Research said in a research note about Aircastle.
The airline added that Brazil's aviation regulator, ANAC, could force it to stop issuing tickets to passengers while it resolves its woes, a measure that "would dramatically affect (our) cash flow."