Avianca Files For Bankruptcy Protection

Filed Under: AviancaTaca

Avianca has just become one of the largest airlines in the world to file for bankruptcy protection as a result of COVID-19.

Avianca files for bankruptcy protection

Avianca, the second largest airline in Latin America after LATAM, has just filed for bankruptcy protection. This comes after the airline has been unable to meet obligations, and after requests for aid from Colombia’s government have been rejected.

COVID-19 has caused a 90% decline in global passenger numbers, and revenue in the airline industry is expected to decline by $314 billion worldwide.

Avianca hasn’t operated a regularly scheduled flight since mid-March, and most employees have gone without pay. Revenue has dropped by over 80%, placing pressure on cash reserves.

With this Chapter 11 bankruptcy protection filing, Avianca hopes to:

  • Protect and preserve operations so Avianca can continue to operate as government restrictions are lifted
  • Ensure connectivity and drive investment and tourism by continuing as Colombia’s flagship airline
  • Preserve jobs in Colombia and other markets where the company operates, with Avianca directly responsible for more than 21,000 jobs throughout Latin America
  • 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

As Avianca CEO Anko van der Werff describes the decision to file for bankruptcy protection:

“Avianca is facing the most challenging crisis in our 100-year history as we navigate the effects of the COVID-19 pandemic. 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.

When government-mandated air travel restrictions are lifted and we are able to gradually resume our passenger flights, we look forward to welcoming back our furloughed employees and playing a leading role in restarting the economy in Colombia and our other key markets.”

Avianca 787 business class

What does this mean for LifeMiles?

LifeMiles is Avianca’s frequent flyer program, and the program is well known for the incredible promotions they have on purchased miles. So what does Avianca’s bankruptcy protection mean for the LifeMiles program?

Well, LifeMiles is a separately owned program, and LifeMiles isn’t part of the bankruptcy proceedings.

I’ve written in the past about what happens to airline miles if an airline goes bankrupt, so as it applies here:

  • For now it should be business as usual for earning and redeeming LifeMiles
  • In the event that Avianca didn’t emerge from bankruptcy, it’s possible that the LifeMiles program would still live on in Latin America, given how popular it is, and given that it’s spun off
  • However, if that were to happen, don’t expect that LifeMiles would still have access to Star Alliance award space, since the program would no longer be associated with a Star Alliance airline

You can still redeem LifeMiles on Star Alliance airlines

Bottom line

Hopefully Avianca emerges from bankruptcy protection stronger than ever. Unlike many other airlines around the world, Avianca hasn’t gotten much government aid, and in current circumstances that makes it almost impossible to continue operations. That’s especially true when you consider that the airline was already undergoing a restructuring when this all started.

If you have any LifeMiles those should be safe for now, especially as LifeMiles is a spun off frequent flyer program.

Comments
  1. OMAAT has a partnership with LifeMiles so be careful about the advice mentioned here. I would use those miles as fast as possible for travel as late as possible, but the situation is now difficult and could be many bagholders as a result of this.

  2. Should I use these miles soon though? Say this year or early next year? I have over 200k in lifemiles thanks!

  3. Avianca is a Colombian airline headquartered in Bogota. How do they get to file for bankruptcy in New York?

  4. All were talking about this here… long time ago…i have a lot of miles!! Sh!t man!!!!

  5. I think you should warn readers against buying any points and miles going forward. Between the inability to spend them right away, the dire financial situation for almost all airlines, and the heavy discounts (for both cash and points purchases) that will be inevitable in the coming year, no one should really buy anything right now unless the deal is much better than the historical best.

  6. I sort of agree with what @David has said… IMO no deals have been that remarkable to the point of risking the purchase. Also, in regards to this, do you know what would happen to *A awards should AV go down?

  7. On one of my last Avianca flights back in early November, I happened to sit next to the Avianca’s CEO in business class between BOG and SAL. We chatted for the entire flight – it was fascinating!! He was my first airline CEO seat mate.

    Needless to say, no one at that time had an inkling of what would be coming just a few months hence. I’ve had good experiences with Avianca – I hope they can pull it out.

  8. I don’t see Avianca going under. They may become a smaller airline, they may even be bought….but it’s such an important airline in South America…and one of the oldest in the world. In the end I think they will get enough from the Colombian government to survive.

  9. I remember LatinPass 20 years ago. The program eventually had no airlines – hence no value. Redeem any miles you have now!

  10. lol @ David and Ben Holz

    OMAAT is a business, not a public service announcement. If they don’t keep pushing miles, how do you expect them to make money?

  11. @ Voldoo @ Akhenaton — I’ve never made a dime for promoting buying Avianca LifeMiles.

  12. @Voldoo
    I know it’s a new concept to some Americans, but businesses can also choose to lookout for the interest of its customers. Even if it hurts profits over the short term, it can bolster the brand in the long term.

    OMAAT will just end up hurting itself if it gets readers to buy Lifemiles, then 2 weeks later Lifemile undergoes liquidation.

  13. I have 850.310 miles in my account.
    I use them to fly in first always, but now i have too many.

    Hotels are a bad deal, only poane tickets are good.

    Does anyone know any other use for this??

  14. @ Lucky

    What about this?

    https://onemileatatime.com/omaat-lifemiles-promo/

    “In the interest of full disclosure, OMAAT earns a referral bonus for anyone that’s approved through some of the below links. ”

    Just to be clear, I don’t have a problem with our symbiotic relationship. I’ve received loads of valuable information from your site that has enhanced the quality of my travel over the years. I certainly have no problem with you getting financial compensated for it.

  15. Pretty much everyone in South America knew this was coming. No big surprise. And I will assume that LifeMiles will be toast in a few months – if not sooner. A scramble for redemptions before Star Alliance drops them, and the lack of anyone purchasing or transferring, will sink them quickly. It’s like a run on a bank.

    Forget any Govt. bailout. Columbia is not South Africa and they will function just fine without a national carrier for now. LATAM, or even GOL, will move in quickly to plug domestic operations and there are plenty of other carriers serving the country for International, of which Miami is the key.

    Lifemiles was unique. I will miss it despite the horrid website and impossible customer service. Avianca? Not that great, something better will emerge.

  16. So….How does a Colombian airline, based in Bogota file for bankruptcy in New York??? Can someone help me out on this?

  17. Just 2 days ago I filed a couple complaints with my credit card company because Avianca had exceeded a reasonable amount of time (30 days) in refunding a pair of cancelled flights. Next I will toss a LifeMile salad with my 160m points. Been flying the Mia-Sal route for 20 years. Bring back Taca and Distancia..

  18. RC: the linked press release explains it in detail, but many countries recognize the US chapter 11 process.

  19. @ Lucky — Ben, Lifemiles just sent out an email to the customers. Business as usual for now.

  20. @RC I don’t know the answer to your question but, believe it or not, you should add to your list the fact that AV’s current tax domicile is in Panama. What is also interesting is that in 2003, AV also filed for Chapter 11 in the US. Back in that day, AV was domiciled in Colombia for every purpose, including tax purposes.

  21. @ Voldoo — That disclaimer refers to the credit card links on the page. Notice it says “approved through some of the links.” There’s no approval process required for buying miles.

    Again, I can promise I’ve never once been paid anything for anyone buying LifeMiles. Period.

  22. @ Ivan
    Business as usual but if AV leaves *A that leaves many with much less ways of using the miles. Then again, I could see UAL doing something with them

  23. SO I am very confused… this is not a US based company but was allowed to file bankruptcy in the United States? WHAT? So I guess I would be able to then file for bankruptcy in their country? This is a SCAM!

  24. “For now it should be business as usual for earning and redeeming LifeMiles”, eh? OK they are supposed to pay you a commission, reckon you can wave goodbye to that income and give us unbiased news. What about some instructions how to quickly get some value, any value from those Lifemiles. Use them to buy toasters maybe?

  25. Now I don’t wanna sound too pessimistic, but if Avianca goes down LifeMiles will probably too. Even though they’re separate companies. Just look at AirBerlin and TopBonus. And FYI: if Life Miles goes into bankruptcy all mileage tickets will become invalid, bc they are only paid shortly before the flight to the operating airline. (Same was with Top Bonus)

  26. @Voldoo @Akhentan – don’t be a**holes! No one is forcing you to read this site nor take any advice. You always buy at your own risk, shit happens, stop blaming other’s for bad decisions you make.

    Also, why do people have hundreds of thousands and millions of foreign miles? I mean I get how good Lifemiles are but it’s approximately 10-12 roundtrip business or first class flights

  27. Another use is to make Amazon purchases (including physical Amazon gift cards. They convert eight at .65 cents per mile.

    I made a personal decision based on my situation (which follows)

    1) I have a little over a million miles stashed
    2) 75% is in US airlines
    3) 117,000 Lifemiles
    4) I am 65, retired, and do not anticipate flying outside US this year
    5) I may fly in the US late in the year
    6) This was to be my year for my first travel beyond North America, and the Caribbean
    7) Then COVID-19 happened – See # 6
    8) A part of me would just like the Lifemiles future to be irrelevant (peace of mind)

    Last night (before the Avianca bankruptcy or at least before I knew) I used my 117,000 Lifemiles in Amazon transaction, I ordered a physical $600 Amazon gift card (I couldn;t get an ecard to work) and about $160 in merchandise.

    So I got a total of $750. Yes I know that’s about 1/2 of what they’re selling for (not really relevant for me). Yes I know if I had at least somewhat near term plans I could get a much greater value. But for my situation when I weighed Lifemile uncertainty, when I would use them (devaluation risk), and the situation with other miles I pulled the trigger.

    Afterwards, and perhaps even more today, I feel good about the conversion. I won’t feel bad if all goes well for Lifemiles (and I hope it does for others’ benefit, because I find Monday morning quarterbacking to be counterproductive.

    As to the mechanics it was easy to load the Chromebook app. Then a “buy with Lifemiles” button
    appears when checking out (except when I tried an Amazon egift card). When I hot the button the transaction took about 30 seconds. The order showed as paid and my Lifemiles total was reduced.

    A heads up… I did have a momentary jolt when the Amazon email showed the order being paid by Mastercard. First I confirmed I had no such Mastercard, and then I saw a Mastercard in payment methods that said LIFEMILES. Evidently the conversion process uses an intermediary creation of a prepaid Mastercard, although I may not be wording that well).

    Again this won’t be for everybody (or many), but Marco did ask for other options. It’s all a balance of your situation, including peace of mind.

  28. All very well to say that our Lifemiles are safe, but if Avianca ceases to exist, the LM program is not tethered to a *A airline, and has no redemption possibilities other than Avianca itself.
    Now really, how many LM buyers ever, and I mean ever, considered stepping onto a Avianca aircraft? Almost no-one!

    If the worst happens our miles are useless and without value.

  29. They also closed and liquidated their Peruvian subsidiary today, May 10th 2020.

    Avianca Holdings will continue to serve Lima from Bogotá (Avianca Colombia) and San Salvador (TACA).

    All Avianca Peru’s routes are cancelled. They used to fly direct from Lima to Buenos Aires, La Paz, Porto Alegre, Sao Paulo, Santiago, Bogotá, San José, Guayaquil, Quito, San Salvador, Mexico City, Cusco and Miami.

    Source:
    https://www.avianca.com/pe/es/sobre-nosotros/centro-noticias/noticias-avianca/avianca-peru-ingresa-a-proceso-disolucion-liquidacion/

  30. Chapter 11 doesn’t mean cessation of operations. In fact the chapter 11 law is designed to give a chance to the business of continuing. They file in the US to protect from financial liabilities  The stock is toast, the bondholders should worry but they wont cease to exist tomorrow.. + *A need a carrier in South America and lifemiles is a separate , profitable entity. Obviously not the time to buy millions of miles but I think no reason to panic either.

    I have 6 business tickets in Jan to South America and 500k lifemiles. Am i please? No. Am i panicked? No

  31. I got an email from Lifemiles that the deduction for the Amazon gift card had been cancelled. I have not seen any similar email about other orders for merchandise. The order still showed as open on the Amazon end, so it looks like this was initiated by Lifemiles.

    For now I cancelled the gift card order on Amazon and will try some other purchases.

    Not sure what’s up.

  32. Love seeing everyone cry here over their frequent flier miles. How about paying for a revenue ticket?

  33. @Carl: did you try using the gift card? Maybe see if you can use it before the thing is cancelled by amazon and let them deal with the miles issue.

  34. It turns out you cannot use Lifemiles for gift cards, but you still can for merchandise on Amazon. Mike (a guest on FrequentMiler) found this on the terms of the company that’s the processor between Lifemiles and Amazon.

    I was getting a $600 gift card. I’m not sure there’s that much stuff I need right now.

  35. @Ray – The order was for the physical card, so I never had info. It accepted the order for that, but would not for an ecard,

  36. John you are so right. Maybe if everybody paid the airlines would not be in this peril in a first place. I shop at Publix and Wal-Mart and others and do not get frequent free food or clothes. That free miles idea is not a good idea. Until now people were flying like crazy no need for freebies. You could not walk thru airports most of the time. Time for change when the life gets normal again.
    .

  37. Its sad that one of the oldest airlines in the world is on the verge of dying and all people care about is its frequent flyer program…such greediness

  38. Greed? Trying to find ways to a “refund” is greed? Buying miles it like buying ticket but with “award” money you paid for. Why should I “care” about lineage and history in regards to “refunds”? As aviation geek I do care about it, but I shouldn’t fund their prestige and history with my meager paycheck. That is tone deaf.

  39. @Pearl – Miles are a big money-maker for the airlines, They make loads off selling miles directly to us and to credit card issuers. Only an idiot would buy or even bothering earning miles in other ways if there were not going to use them. Avianca would likely have been gone long ago without Lifemiles. They sold their money-maker only when forced to by poor operations before.

    @Luke – Let’s say your long-time favorite restaurant was going chapter 11 (and possibly under) and you had hundreds or thousands of dollars in their gift cards possibly not being honored. Would you feel greedy for worrying about that,

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