Avianca Filing For Bankruptcy

Posted on May 13, 2020 by From the Newsroom in Frequent Flyer Programs, Lifemiles, Travel Deals, Travel News

Following the news and updates around the COVID-19 pandemic, many airlines were forced to suspend or reduce their daily operations. We have the latest information from airlines and hotels all around the world. Unfortunately, many airlines are struggling to stay afloat during the pandemic. Virgin Australia was the first large airline to fall under the pressure of the COVID-19 pandemic. We also saw airlines like South African Airlines, SAS, British Airways, and many more being forced to fire a big number of employees due to lack in demand. Now, the world’s second-oldest airline, Avianca is filing for bankruptcy protection.

Avianca Files for Bankruptcy

Avianca Holdings is comprised of the Colombian airlines Avianca and Tampa Cargo, the Ecuadorean airline Aerogal and the companies of the Taca International Airline Group. This is not the first time they have faced a similar situation, as they filed for bankruptcy once before, in 2003. Bolivian oil businessman, German Efromovich stepped in and bought a majority stake in the company, which he owns to this day, although he is not a member of the board.

Avianca is the world’s second-oldest airline after KLM and the second-largest carrier in Latin America. They announced that the carrier will file for Chapter 11 of the bankruptcy code on Sunday, May 10, 2020. The airline was facing a $65 million bond payment due on Sunday which they failed to meet which lead to the filing for bankruptcy. Chapter 11 of the bankruptcy code may help the carrier reorganize and restructure their debt.

From the official press release:

Avianca continues to be engaged in discussions with the government of Colombia, as well as those of its other key markets, regarding financing structures that would provide additional liquidity through the Chapter 11 process and play a vital role in ensuring that the Company emerges from its court-supervised reorganization as a highly competitive and successful carrier in the Americas.

The carrier was already in a bad financial state, the COVID-19 pandemic only deepened the problem, they had $7.3 billion in debt in 2019. Avianca temporarily suspended all operations in late March. The carrier did this following the decision to close the country’s airspace as the number of confirmed coronavirus cases continued to rise. Avianca was forced to ground 142 aircraft and put over 12,000 employees on unpaid leave.

The LifeMiles Frequent Flyer Program

Luckily, LifeMiles is a separate company and will not fall under Chapter 11 of the bankruptcy code. Avianca plans to continue honoring the LifeMiles loyalty program. They also extended its frequent flyers’ Elite status through January 2022. All members can continue to earn miles on Avianca flights as well as redeem LifeMiles for Avianca tickets as they usually would. In addition to Avianca, members will be able to continue earning and redeeming miles with Star Alliance airlines and other airline partners such as AeroMexico and Iberia, as well as at participating hotels, rental car agencies, and other partners.

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