Avianca Files For Chapter 11 Bankruptcy Protection

3 Comments

Avianca Holdings, based in Panama, on Sunday, filed for Chapter 11 bankruptcy protection in the United States for the second time.

Avianca has been mostly grounded since mid-March and has sought $1.2B financial help from the Colombian government (read more here).

You can access Avianca’s reorganization website here and LifeMiles here.

Here’s the announcement:

Download (PDF, 580KB)

Infographics:

Download (PDF, 302KB)

Court Filing:

Download (PDF, 2.8MB)

Financials

Download (PDF, 2.41MB)

Stock Price:

The equity value was $40M before the airline collapsed.

Notes on Avianca Holdings Financial Statements:

There are $243M assets versus $880M liabilities recorded with LifeMiles.

Here’s an email that LifeMiles just sent out (Google translate from Spanish):

Conclusion

The situation around Avianca has been confusing as of late after the majority shareholder defaulted on loans extended by United Airlines that were guaranteed by shares (51% of Avianca). United wrote off the investments it made directly to the airline and the owner, and ceded the voting rights to another party.

Avianca Brazil collapsed last year (was not owned by Avianca directly but by the previous majority shareholder). The filing also notes that the airline will close its operations in Peru.

The email that LifeMiles sent out and the FAQs on the unique LifeMiles News website try to convince how financially sound this separate entity is. Their liabilities, however, fax exceeds the assets.

LifeMiles, 70% owned by Avianca based in Bermuda, is not part of the proceedings. There is no doubt, however, that this arm cannot continue trading if the airline ends up liquidating. Why would there be a need for a frequent flier program that is not backed up by an airline?

Here are the frequently asked questions by LifeMiles to consumers:

  1. Why did Avianca file for Chapter 11 protection?

  • Avianca entered this court-supervised process to protect and reorganize its business while the global airline sector and broader travel industry recover from the impacts of the COVID-19 pandemic.
  • Almost every airline in the world is undertaking some form of financial restructuring, many with the direct support of their governments.
  • Even outside the current global health crisis, Chapter 11 is not an uncommon process for a company to initiate – over the last two decades, airlines such as United, Delta, American and US Airways have all gone through this process. In each situation, the airline’s frequent flyer program remained intact.
  • It’s also worth noting that Avianca has sought Chapter 11 protection before. In 2003, the company restructured under Chapter 11 and later emerged well-positioned to continue playing its important role in Colombia’s domestic and transnational growth.
  • Avianca is confident that it will emerge from this reorganization process as a better, more efficient airline that operates for many more years.
  1. Is Avianca going out of business?
  • Avianca will continue to operate. The company plays an important role in the economies and tourism industries of its core markets, transporting more than 50% of the passengers and more than 40% of the cargo in Colombia, and more than 75% of the passengers in Central America, excluding Panama.
  • The Chapter 11 process is a temporary one that, according to the laws of the United States of America, allows companies to reorganize and complete financial restructurings under the supervision of the U.S. court system.
  • Many airlines have entered into and later emerged from Chapter 11 in the U.S. in recent years. This list includes: United, Delta, American, and US Airways.
  • Just as these airlines did, Avianca will continue to operate during the reorganization process. Avianca expects to resume its passenger flights as soon as government-mandated air travel restrictions are lifted.
  1. How will Avianca’s situation impact LifeMiles?
  • It’s important to know that LifeMiles and Avianca are separate companies, and LifeMiles is not part of Avianca’s Chapter 11 filing.
  • Avianca plans to continue honoring the LifeMiles loyalty program, and has extended its frequent flyers’ Elite status through January 2022.
  • Members will continue to earn miles on Avianca flights as well as redeem LifeMiles for Avianca tickets as normal. Avianca expects tickets redeemed with miles will continue to be exempt from change penalty fees until October 2020.
  • Ultimately, LifeMiles, not Avianca, is responsible for paying for the cost of rewards when miles are redeemed – we will continue to do this. We can assure our members that our financial position is strong and your miles are safe.
  • LifeMiles has an extensive network of 550+ commercial partners, including most of the leading financial institutions in each of the countries where we operate.
  • As LifeMiles members, you will continue to be able to redeem your miles in all the ways you have in the past, with new redemption options being added regularly. For instance, recently LifeMiles launched the option to redeem miles with Uber and Uber Eats.
  • We’d also emphasize that every accrual of miles extends the validity of all miles in the member’s account for at least 12 months more. In this way, the best way for you to protect your miles is to keep accruing.
  • As far as travel goes, in addition to Avianca, LifeMiles members can earn and redeem miles on Star Alliance airlines and other airline partners such as AeroMexico and Iberia, as well as at thousands of participating partner locations including premier hotels, major car rental companies, popular restaurants, and other commercial establishments such as gas stations, supermarkets and leading apparel brands.
  1. What does this mean for my miles and my LifeMiles account? Will I still be able to redeem and accrue them?
  • Your miles are safe, and can be redeemed as normal. Members should remain confident in the value of, and ability to redeem, your miles today, tomorrow and beyond for air tickets, hotel nights, car rentals, our online catalog or purchases at any of our commercial partners.
  • Avianca’s announcement does not directly affect LifeMiles’ 550+ partnerships, or members’ ability to use your miles however you enjoy doing so.
  • You can easily check the date until your LifeMiles are valid until on your member profile page at LifeMiles.com.
  • Importantly, every time you accrue additional miles, this will extend the validity of all miles in your account for at least 12 months more. In this way, the best way for you to protect your miles is to keep earning more.You can find more information on how to earn and use your miles at www.lifemiles.com/shop/shopping-partners.
  1. What about my LifeMiles-Avianca-Bank credit card?
  • You can remain confident in the value your LifeMiles-Avianca-Bank credit card provides.
  • You will continue to earn miles for your everyday purchases as normal. Remember, your card allows you to “double dip” (earn miles twice on the same purchase) on purchases within our network of coalition partners.
  • If your card included an Elite status, this status will be respected and have the same benefits it always did.
  • And, keep in mind that every time you use your credit card, the validity of your miles extends for at least 12 months more. As long as you use your card, your miles will never expire – they will always be there, growing in balance, until you choose to use them!
  1. Can I use my miles on other airlines? Can I still earn and use miles on Star Alliance airlines?
  • Yes, your miles can still be used to redeem air tickets. In addition to Avianca, you can continue to earn and redeem 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 like retail stores and gas stations.
  • Remember to provide your LifeMiles number when flying to earn miles on eligible airline partner flights. 
  1. Can I still accrue miles while Avianca is going through Chapter 11?
  • Yes, Avianca plans to continue honoring the LifeMiles loyalty program.
  • Every time you fly with Avianca, you will continue to earn your regular flight miles as you did before.
  1. Can I continue to use my miles for things other than flights, such as retail stores and gas stations?
  • Yes, LifeMiles will continue doing business as normal. Our relationship with our partners has not changed.
  • You can continue to earn and redeem miles in all the ways you have in the past, with new redemption options added regularly. For instance, recently LifeMiles launched redemption of miles with Uber and Uber Eats.
  • Thanks to our extensive network of 550+ commercial partners, you can earn and redeem rewards at thousands of participating partner locations including premier hotels, major car rental companies, popular restaurants, and other commercial establishments such as gas stations, supermarkets and leading apparel brands.
  • You can find more information on how to earn and use your miles at www.lifemiles.com/shop/shopping-partners.
  1. Will this affect LifeMiles partnerships or member benefits?
  • Not at all! LifeMiles has strong relationships with our extensive network of 550+ commercial partners, which includes most of the leading financial institutions in each of the countries where we operate.
  • You can continue to earn miles through your everyday purchases by using your LifeMiles co-branded credit card, and by shopping in our broad network of partners.
  • Elite member benefits will remain the same. Avianca has extended its frequent flyers’ Elite status through January 2022.
  1. Will there be changes to the LifeMiles loyalty program as a result of Avianca’s Chapter 11 process?
  • We are not planning to make any changes to the LifeMiles loyalty program as a result of Avianca’s reorganization process, and Avianca plans to continue honoring the LifeMiles loyalty program. Avianca has extended its frequent flyers’ Elite status through January 2022. Our intention is to continue improving the experience of the program over time.
  • LifeMiles will continue to add new partners, and provide our members with excellent opportunities to earn and redeem miles.
  • The recent addition of Uber and Uber Eats as partners across several countries where we operate is just one example of how we are constantly striving to make our program better and better for our members.
  1. What does this mean for my Elite status with Avianca?
  • Avianca plans to continue honoring the LifeMiles loyalty program, and has extended its frequent flyers’ Elite status through January 2022.
  • Your Elite status and the benefits that come along with it will be honored. Avianca has extended its frequent flyers’ Elite status through January 2022. 
  1. What does this mean for my future travel plans? Is my ticket with Avianca or its airline partners still valid?
  • Your redemption tickets are and will continue to be valid.
  • You will still be able to complete your travel plans with your redemption tickets on Avianca, Star Alliance partners and other airline partner flights.
  • Additionally, the LifeMiles you’ve earned are safe – LifeMiles will not expire any miles between April 1, 2020, and December 31, 2020.
  1. Can I get a refund on miles I just purchased?
  • No, all miles purchased are non-refundable. Your miles remain valuable; you can continue to use them for air tickets with Avianca or Star Alliance partners, hotel nights, car rentals, our online catalog or purchases at any of our commercial partners.
  1. Can I get a refund on the flights I previously purchased?
  • Yes, LifeMiles allows refunds on any purchased ticket if it is fully unused. Currently, given the COVID-19 pandemic, we are allowing for free redeposits of your tickets if you were traveling between March and June 2020. Otherwise, you can get a refund based on your purchased ticket conditions. If you need assistance, please contact us so we can help.
  1. How do I contact LifeMiles with additional questions?
  • We encourage you to email us at support@lifemiles.com.
  1. I flew with Avianca or air partners and I haven’t received my miles, what can I do?
  • You can always request your missing miles up to one year after your flight.
  • If you have missing miles from Avianca flights, you can request them at lifemiles.com/fly/retro.
  • For missing miles with air partners, you can request them by writing to us at .
  1. Is it safe for me to redeem on Avianca or other airlines?
  • Yes! As we mentioned, the value of your miles will continue today, tomorrow and beyond, with no changes.
  • Once airports are open once again, Avianca will continue to operate its flights and you will be able to use your miles for any Avianca travel destinations.
  • In the same way, you can continue using your miles for redemptions on any of the 26 Star Alliance partners or for Iberia or Aeromexico flights.
  1. Does it make sense for me to convert my miles from banks or other loyalty programs into LifeMiles during Avianca’s reorganization process?
  • Yes! As we mentioned, the value of your miles will continue today, tomorrow and beyond, with no changes.

  • You can continue converting your miles from banks or other programs into LifeMiles in the same ways as always.

  • Once converted into LifeMiles, your miles can be used for redeeming air tickets with Avianca or other air partners, hotel nights, car rentals, restaurants, purchases at retail partners and much more!

Here are the frequently asked questions by LifeMiles to vendors:

  1. What does this mean for my partnership with LifeMiles? What changes should I expect?

  • This news does not affect our partnership or how we do business with you.
  • Our main goal remains unchanged – we will continue to support you and your business, generate value for your clients, help you drive traffic and sales, and strengthen the loyalty of your most valued customers.
  • LifeMiles is continuing to operate as normal, supported by our strong financial position, extensive commercial partner network, and loyal member base.
  • Importantly, our members can still earn and redeem miles with Avianca, Star Alliance airlines, AeroMexico and Iberia, as well as at participating hotels, rental car agencies and other partners like retail stores and gas stations.
  • Our entire team remains focused on delivering for our commercial partners and our members – this is our top priority.
  1. Does Avianca’s filing impact LifeMiles’ financial position?
  • LifeMiles is a separate business from Avianca, with distinct legal entities, separate shareholders, and our own majority independent governance body.
  • LifeMiles remains well capitalized and our assets are insulated from Avianca’s reorganization process.
  • LifeMiles is continuing to operate as normal, supported by our strong financial position, extensive commercial partner network, and loyal member base.
  1. Will Avianca honor the terms of its loyalty program with LifeMiles?
  • Yes, Avianca plans to continue honoring the LifeMiles loyalty program, and has extended its frequent flyers’ Elite status through January 2022.
  • Members will continue to earn miles on Avianca flights as well as redeem LifeMiles for tickets on Avianca, or any of its StarAlliance partners, as normal.
  • More information on Avianca’s announcement can be found at www.aviancawillkeeponflying.com.
  1. How will this impact LifeMiles’ members?
  • Members will continue to accrue and redeem miles as normal.
  • This news does not affect LifeMiles’ partnerships, members’ status or how we do business – so members can remain confident in the value of their miles today, tomorrow and beyond.
  • In addition to Avianca, LifeMiles members can earn and redeem miles on Star Alliance airlines, AeroMexico and Iberia, as well as at participating hotels, rental car agencies and other partners like retail stores and gas stations.
  • Importantly, the miles our members earned aren’t going anywhere – LifeMiles has committed to pause the expiration of all miles scheduled to expire between April 1, 2020, and December 31, 2020.
  1. What will happen to members’ miles? Will they continue to accrue and redeem miles as usual?
  • Members’ miles are safe, and can be redeemed as normal. Members should remain confident in the value of, and ability to redeem, their miles today, tomorrow and beyond.
  • Avianca’s announcement does not directly affect LifeMiles’ 550+ partnerships, or members’ ability to use their miles however they enjoy doing so.
  • Importantly, every time members accrue additional miles, this will extend the validity of all miles in their account for at least 12 months more. In this way, the best way for members to protect their miles is to keep accruing.
  • More information on how LifeMiles can be accrued and redeemed is available on www.LifeMiles.com.
  1. Are the miles we bought still valuable?
  • Yes! Your miles, and the miles you have awarded to your clients, are safe, and can be redeemed as normal, both for air redemptions and in our commercial partners network:

    Air Redemptions

    • Importantly for LifeMiles and its members, Avianca will continue to operate during the reorganization process and plans to resume its passenger flights as soon as government-mandated air travel restrictions are lifted.
    • Members will continue to earn miles on Avianca flights as well as redeem LifeMiles for Avianca tickets as normal.
    • In addition to Avianca, members can continue to earn and redeem miles with Star Alliance airlines and other airline partners such as AeroMexico and Iberia.

    Commercial Partners Network

    • LifeMiles members will continue to be able to redeem their miles as normal at thousands of participating partner locations including premier hotels, major car rental companies, popular restaurants, and other commercial establishments such as gas stations, supermarkets and leading apparel brands.
    • New redemption options are being added regularly. For instance, recently LifeMiles launched redemption of miles with Uber and Uber Eats.
    • Furthermore, while the airline industry recovers, we will focus commercial activities on providing our members great value in commercial partner redemptions and helping all of our commercial partners to drive traffic, increase sales and successfully recover their business.
  1. Who should I contact with additional questions?
  • You can reach out to your usual point of contact (sales representative or key account manager) with any questions.

If you enjoyed this article, get our blog updates for free!

Previous articleMarriott Bonvoy Off Peak/Standard/Peak Pricing Getting Out Of Control?
Next articleMarriott Bonvoy Indonesia Two-For-One Rate Plan For Stays Through April 30, 2021 (Book By June 15)

YOU MIGHT ALSO LIKE