Avianca Bankruptcy
It is no secret that airlines have been under intense pressure due to the sudden drop in travel because of COVID-19. Today we learned that Avianca has filed for Chapter 11 bankruptcy reorganization due to their current financial situation. The LifeMiles loyalty program is not part of the bankruptcy.
“Avianca is facing the most challenging crisis in our 100-year history as we navigate the effects of the COVID-19 pandemic,” said Anko van der Werff, Chief Executive Officer of Avianca. “Despite the positive results yielded by our ‘Avianca 2021’ plan, we believe that, in the face of a complete grounding of our passenger fleet and a recovery that will be gradual, entering into this process is a necessary step to address our financial challenges.”
Avianca Is Not Going Away
As part of the reorganization process Avianca intends to:
- Protect and preserve operations so Avianca can continue to operate and serve customers with safe and reliable air travel, under the strictest biosafety protocols, as COVID-19 travel restrictions are gradually lifted;
- Ensure connectivity and drive investment and tourism by continuing as Colombia’s flagship airline, serving over 50% of the domestic market in Colombia and providing essential non-stop service across South America, North America and European markets as well as continuing cargo operations, playing a key role in the economic recovery of Colombia and the Company’s other core markets following the COVID-19 pandemic;
- Preserve jobs in Colombia and other markets where the Company operates, with Avianca directly responsible for more than 21,000 jobs throughout Latin America, including more than 14,000 in Colombia, and working with more than 3,000 vendors; and
- Restructure the Company’s balance sheet and obligations to enable Avianca to navigate the effects of the COVID-19 pandemic as well as comprehensively address liabilities, leases, aircraft orders and other commitments.
Mr. Van der Werff added, “We believe that a reorganization under Chapter 11 is the best path forward to protect the essential air travel and air transport services that we provide across Colombia and other markets throughout Latin America. Avianca has operated for more than 100 years – only the second airline in the world to achieve this milestone. We are confident that through this process we can continue to execute our ‘Avianca 2021’ plan, optimize our capital structure and fleet of aircrafts and – with government support – emerge as a better, more efficient airline that operates for many more years.”
Avianca Exiting Peru
While Avianca does plan to keep the bulk of their operations going, the company has announced that they are ceasing their operations in Peru as allowed by law. “In parallel to its Chapter 11 filing in the U.S., Avianca intends to commence a wind-down of its operations in Peru pursuant to local laws. This decision supports essential right-sizing efforts and will allow Avianca to renew its focus on core markets upon emergence from its court-supervised reorganization.”
Tickets, Vouchers & LifeMiles Will Stay Valid
While the parent company of Avianca is filing for bankruptcy, the separate LifeMiles program will remain in tact. Additionally, any tickets, vouchers and gift cards should be honored as of now. All other elite benefits and mileage earning will remain the same for now as well.
You can find more details of the bankruptcy in Avianca’s press release.
Avianca Bankruptcy – Bottom Line
Expect to see many more of these reorganizations as the travel industry continues to deal with the effects of COVID-19. In this case curstomers won’t be impacted for now, but expect huge changes for Avianca going forward.
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Shawn: I have a booked flight from the US to Bogota on Copa set for early August, with planned travel (not yet booked) to Cartagena and Medellin while I’m there. Copa cancelled my flights due to their now modified schedule, running few times during the week. Because of the inconvenience, I was thinking of cancelling the ticket and getting a new one on United (where I’m a 1MM/Premiere Gold) since they are showing a good schedule with plenty of flight options. My initial question was should I still go ahead and book my intra-country trips between those cities on Avianca (since it’s *A) vs. doing it with LATAM? They are showing a full schedule right now. My initial concern was the viability of the airline as it relates to the bankruptcy. But this is assuming the borders open by then. So that led me to wonder if it’s better to just blow Columbia off entirely and book our vacation somewhere else?
Why file for bankruptcy in a New York court when you’re a Colombian entity?
[…] that the airline has been in trouble.With the ongoing pandemic, and their passengers completely grounded, the airline chose to enter the Chapter 11 bankruptcy protection […]