The troubles facing Avianca have alarmed people as it pertains to LifeMiles. We’ve received several emails and comments from folks worried about the program, so my colleague Jordan offered to put together a post with an overview of the situation.
The situation at Avianca is complicated, to put it mildly. There’s a complex web of parent companies, holding companies, and shareholders involved. Avianca Brazil was an entirely separate airline held by the same parent company as Avianca, Synergy Group. Avianca has many different subsidiaries held under Avianca Holdings that operate under the Avianca name.
Avianca Colombia and Avianca Brazil: two airlines with separate loyalty programs
Avianca Brazil’s shutdown is perhaps what’s most concerning. The airline filed for bankruptcy last December, and operations were suspended last week. Avianca has suffered “reputational harm” from the bankruptcy and suspension of Avianca Brazil.
The folding of Avianca Brazil doesn’t have any direct impact on the LifeMiles program.
Avianca operates the LifeMiles program, which is known for sales on purchased miles and reasonable redemption rates. Avianca Brazil had a separate frequent flyer program, Amigo. Avianca Amigo was mainly known for easy matches to get Star Alliance Gold status.
Earning and redeeming LifeMiles continues as usual, despite the challenges Avianca is facing and the closure of Avianca Brazil.
Avianca Colombia has run into some trouble
Avianca Colombia’s controlling shareholder, BRW Aviation, recently defaulted on a $456M loan made by United. These loans were secured with Avianca stock, which United could, in theory, take control of. That’s complicated by United’s contracts with its pilots, which forbids United from owning a foreign airline.
The situation is quite fluid at this point. Avianca’s stock price is low, and some argue a bargain for its underlying assets. The closure of Avianca Brazil has damaged the brand. Despite strong performance with Avianca’s LifeMiles program and the Avianca Cargo division, the Colombian airline still faces financial problems.
While United can’t outright take control of Avianca, they did push for changes in leadership. United privately drove the ouster of Germán Efromovich, the former chairman of Avianca. A new chairperson has already replaced him: Robert Kriete, a former TACA CEO. United has also promised up to 150 million dollars in additional funding in the short term.
United has a considerable interest in Avianca Colombia’s success. That makes it difficult for the airline to falter overnight.
Avianca Colombia is a strong airline in a unique location
We’ve seen a lot of airlines go bust in the past few years. It’s a challenging time for airlines between downward pressure on fares, unstable oil prices, and general economic uncertainty around the world. Despite all of this, Avianca’s cargo division and the LifeMiles program both remain profitable.
Avianca stands to benefit from growing demand for air travel across the Latin markets, as well as from their operations to Europe and the US. United has a lot invested in Avianca. There’s an increasing demand for travel to and across Latin America, and Avianca is well positioned to benefit from this. Both United and COPA have vested interests in seeing Avianca succeed as a significant player in the Latin American market.
While in the short term Avianca may be strapped for cash, in the longer term things do look promising. They face more favorable conditions than many other airlines that lacked any profitable divisions, or any path to profitability.
That coupled with the strong interests both United and Copa have in keeping Avianca afloat make it different from the situations we saw at airberlin, WOW Air, Primera Air, etc.
The LifeMiles program does have challenges
LifeMiles is a great program, but is not without challenges, though none of these are new, or related to the financial concerns of Avianca Brazil.
Not all Star Alliance space is available to LifeMiles members, certain routings don’t show up online and have to be created by email, and the website can be buggy. A recent issue is having the website error out after selecting flights online, and having to complete the booking manually by phone. The LifeMiles call center has improved tremendously.
It is, overall still a handy program for buying and redeeming miles for fantastic value.
Bottom line
While times are certainly tough at Avianca, there are many powerful stakeholders interested in keeping the airline alive. LifeMiles continues to present excellent value for purchasing and redeeming miles for premium cabin redemptions.
As usual, however, I wouldn’t recommend purchasing more miles than you can reasonably redeem in the next 6 to 12 months. If you have a stockpile of LifeMiles, I might work to reduce that balance to one you can redeem in that timeframe. You can always purchase more as you need them.
I saw some flights from SFO-TLV via lufthansa on lifemiles during early august, now everything is gone. every date that i check for 2020 is gone. ChadMC seems to be right. I called as well and they cant find a flight as well and i got a scolding for asking them to find me a single date they have any availability since apparently, they have the same user interface that we are as users see....
I saw some flights from SFO-TLV via lufthansa on lifemiles during early august, now everything is gone. every date that i check for 2020 is gone. ChadMC seems to be right. I called as well and they cant find a flight as well and i got a scolding for asking them to find me a single date they have any availability since apparently, they have the same user interface that we are as users see. which sucks like crazy. whoever built this site needs to go back to website design school. its not user friendly at all and the backend is slow.
I’ve been trying to book a Lifemiles flight with Star Alliance airlines for several days. It was not possible to book, although there is availability shown on the website. I got an error message every time I tried to book. The support of Lifemiles is not helpful at all. Maybe this is the end of the Lifemiles program?
Hi! thanks for the interesting information.
So would you say it's safe to buy a flight ticket for end of October? Is interesting that Avianca flights seem to have very low demand, as prices remain the same and rather low for many weeks. I interpret this as possible customers worrying about the company start cancelling flights.
You mention redeeming Lifemiles on the next 6 to 12 months. If you redeem for a Star Alliance partner flight are you then safe no matter what then happens to Lifemiles? In other words is the concern when you redeem vs when you fly (assuming you're not flying Avaianca itself.).
@Antonio, I would hardly say that I need to get out of Nebraska more since I've stayed at North Island, the Brando, Eden Rock, 10 Amans, Baur au Lac, Cheval Blanc Randheli, Connaught, etc. not to mention various Four Seasons and Mandarins all over the world. With that said, I never been to Nebraska. While it's not high on my to go list, I do think it may be an interesting place to see sometimes...
@Antonio, I would hardly say that I need to get out of Nebraska more since I've stayed at North Island, the Brando, Eden Rock, 10 Amans, Baur au Lac, Cheval Blanc Randheli, Connaught, etc. not to mention various Four Seasons and Mandarins all over the world. With that said, I never been to Nebraska. While it's not high on my to go list, I do think it may be an interesting place to see sometimes down the road.
Thank you for introducing me to Fasano brand. I'll definitely look into that hotel chain when I visit Brazil as an alternative to the tired Belmond hotels.
@Justin, I've stayed at Belmond Miraflores a year and a half ago. Sadly it was not a highlight of my hotel stay in South America. I had a presidential pool suite which unfortunately is right below their top floor restaurant where they serve breakfast. Every morning around 7AM (perhaps earlier), you can hear people dragging chairs back and forth. Same with night time. Unfortunately they put their presidential suite right below their roof top restaurant so noise transfers down to the suite below is inevitable. Either the architect was not thinking right when he/she designed it or the roof top restaurant may be an after thought add on by current/previous owner. Either way it was not a restful experience.
THX for the update. Just found a seat late August from Rome to Los Angeles in Swiss Business. Officially depleted my balance :)
I keep reading about how great the LifeMiles program is, yet I never see much availability at all using LifeMiles. At one point I used to lots of flight options from the US to Europe via either Avianca through Bogota (or Cali) or on United. Now through the end of the year I am yet to find a single flight. It looks like all availability was pulled almost overnight. Might be a fluke but it's...
I keep reading about how great the LifeMiles program is, yet I never see much availability at all using LifeMiles. At one point I used to lots of flight options from the US to Europe via either Avianca through Bogota (or Cali) or on United. Now through the end of the year I am yet to find a single flight. It looks like all availability was pulled almost overnight. Might be a fluke but it's been a few weeks of searching and positively nothing comes up. The only options I see are a few coach seats to some spots in Central or South America, and those are not easy to come by either.
I'd hope the program can be saved, but as of now, I'm seeing it as useful as AAdvantage, which is saying very llittle.
Nowadays lifemiles is useless in Brasil due to Avianca Brasil closure. On the other and to fly abroad its redemption chart is much better than the ones used by its counterparts like Smiles, Multiplus and Tudo Azul mileage programs.
But I have a doubt: Why would Copa Airlines have some advantages with Avianca Colômbia Healthy financial status? Wouldn't be the contrary?
Really great recap, thanks Lucky!
How did the Avianca brand (from Colombia) be allowed to basically take over every South American countries airline?
Secondly, do they or do they not have access to LH F? I see it sparingly to/from the US but have heard it’s easy to find to Asia or beyond. Anyone want to elaborate?
"The airline filed for bankruptcy last December, and operations were suspended last week."
So has anyone kept an official list of all the airlines that have gone belly-up this year so far?
Anantara Bahia, Unique SP (this one is VERY nice.....), JW Marriot Convento in Cuzco... Faena Bbaa, Palacio Duhau...... These are only the ones I've stayed in, Sofitel RJ is cool, Hyatt CTG also..
@kevin I find you certainly inaccurate, Fasano hotels in SP, RJ, Emiliano. Bogotá has plenty of excellent hotels, Hilton Miraflores either, maybe you should go out of Nebraska and travel a bit around the world... So far luxury in us is a bit cheap.... Destination fee DC????
Yes to die of boredom...
@ Ben -- Thanks for listening.
This summary misses the biggest issue: If United were to exercise its right to take control, then approximately $1.5B in Avianca’s debt would accelerate and become immediately due, because of change in control covenants (and Avianca doesn’t have the money to pay off that debt); but even if United does not take control (it won’t), United having the right to do so makes it harder for Avianca to obtain current financing (because lenders don’t want...
This summary misses the biggest issue: If United were to exercise its right to take control, then approximately $1.5B in Avianca’s debt would accelerate and become immediately due, because of change in control covenants (and Avianca doesn’t have the money to pay off that debt); but even if United does not take control (it won’t), United having the right to do so makes it harder for Avianca to obtain current financing (because lenders don’t want to lend to a company that could be on the hook to immediately pay $1.5B at any time).
Avianca will presumably try to renegotiate it’s loan covenants to remove the change in control provisions (at least with respect to United taking control). The lenders should be open to that. But until and unless that happens, Avianca is in a very bad place.
Hi!!! Just important to note that LifeMiles is technically also a separately legal entity from Avianca. The program was spun out in 2015 and is partially owned by a private equity firm Advent International.
Main concerns are the bonds. No mention of that here.
@Eskimo - buying a stock isn't the same as making a loan. It's an investment. United of course expected the stock price to increase over time. But they clearly also wanted influence over Avianca's executive operations, and they got it (and exercised it). As the article implies, that influence may well be worth more than the money the invested. For instance, if they can get Avianca to coordinate routes, then the payoff for UA could...
@Eskimo - buying a stock isn't the same as making a loan. It's an investment. United of course expected the stock price to increase over time. But they clearly also wanted influence over Avianca's executive operations, and they got it (and exercised it). As the article implies, that influence may well be worth more than the money the invested. For instance, if they can get Avianca to coordinate routes, then the payoff for UA could be quite large. It's unlikely that United ever planned to take over Avianca, or even saw that as an option in the case that Avianca faced financial difficulties.
These loans were secured with Avianca stock, which United could, in theory, take control of. That’s complicated by United’s contracts with its pilots, which forbids United from owning a foreign airline.
This is why United used to be (are still) run by idiots. You don't loan out money if the collateral is worthless to you. Good luck selling a failing airline stock to other people.
The main problem with Avianca for travelling to or from US is the mandatory stop over in the uggly San Salvador airport with an overcrowded lounge full of people travelling in coach. Hope one day they are copying United with the Polaris lounge assess. When you pay 3 or 5 times the price of the coach ticket you get picky :))
@Kevin: I felt that the Belmond Miraflores Park in Peru was excellent for a 5-star hotel. Not extravagant, but very high quality service and nice, renovated rooms. The other Belmonds in Peru were, I agree, not impressive for the true-luxury standard.
The new site is horrifying!!!
Not practical at all!!
Availability bad! Hope they copy united or AA redemptions site.
I agree with jordan. But you need to add avianca argentina.. wich is in bankrupcy too.
Avisnca brasil and avianca colombia are from two brothers. So company is the same. Amigo and lifemiles are different...but the company is the same.. AVH.
I had a big problem with lifemiles on my last redemption.
I made a booking with two different airlines..one changed the time and was imposssssible to fix it. No one wanted...
I agree with jordan. But you need to add avianca argentina.. wich is in bankrupcy too.
Avisnca brasil and avianca colombia are from two brothers. So company is the same. Amigo and lifemiles are different...but the company is the same.. AVH.
I had a big problem with lifemiles on my last redemption.
I made a booking with two different airlines..one changed the time and was imposssssible to fix it. No one wanted to take care of the mistake. It was in bussines and finally the second part of the flight i had to accept to fly in economy in a different flight. And was the only option. Incredible.
Lifemiles was a good option for me...but ñong time ago.. not now. Not anymore.
Thanks
Thanks for the article. Having a pretty good stash of these I had been wondering the same thing that others had inquired about. I hope they do well as they have been very useful for me.
Eeeks, hope they get it together until I get to Machu Picchu and Rio a year from now! South America is a beautiful continent but concept of luxury travel is so new to them. Service level at purported five stars hotels are uneven at best unlike what you find in Southeast Asia or Western Europe. The only exception is Awasi in Patagonia. Other than that one, no hotels come close to what a luxury hotel...
Eeeks, hope they get it together until I get to Machu Picchu and Rio a year from now! South America is a beautiful continent but concept of luxury travel is so new to them. Service level at purported five stars hotels are uneven at best unlike what you find in Southeast Asia or Western Europe. The only exception is Awasi in Patagonia. Other than that one, no hotels come close to what a luxury hotel should be from my travel to that continent. Maybe now LVMH have bought Belmond, they will upgrade that quasi luxury brand to true luxury. I mean I don’t expect Cheval Blanc level but maybe Four Seasons. And I mean Four Seasons Mexico City, Hk, etc level of service....not the one in Buenos Aires. I keep it a !
Good to know, as I'm booked on an Avianca flight (paid not miles) to Ecuador via Bogota in late September. Thanks for the summary.