Category Archives: Avianca (Peru)

Avianca Peru is being liquidated

Avianca (Peru) Airbus A330-243 N279AV (msn 1279) MIA (Brian McDonough). Image: 925808.

Avianca Group, as part of its Chapter 11 reorganization, made this announcement about Avianca Peru, formerly TACA Peru:

In parallel to its Chapter 11 filing in the U.S., as previously announced, Avianca is commencing a liquidation of its operations in Peru pursuant to local laws, which will allow Avianca to renew its focus on core markets upon emergence from its court-supervised reorganization.

Avianca Perú is an airline based in Lima, Peru. It operates domestic services and international services. Its main base is Jorge Chávez International Airport (LIM), Lima. The airline operates out of 18 airports. It is part of the Synergy Group and operates its flights with TACA’s codes. Through Synergy Group, it is one of the seven nationally branded airlines (Avianca Ecuador, Avianca Honduras, etc.) in the Avianca Holdings group of Latin American airlines.

In other news, Avianca Group announced first day approvals of its motions in the bankruptcy court:

Avianca Holdings S.A. has announced that all “first day” motions related to the Company’s voluntary reorganization proceedings initiated on May 10, 2020 have been approved on an interim or final basis by the U.S. Bankruptcy Court for the Southern District of New York. Collectively, the orders granted by the Court at the hearing will help ensure that Avianca continues normal business operations throughout the reorganization process.

Among other things, the Court approved motions that will allow Avianca to protect employees and suppliers while also continuing to serve customers. Avianca received authorization to:

  • Pay certain employee wages, compensation and benefit obligations owed from before the filing date, as well as to continue paying wages and honoring employee benefit programs in the normal course of business during its Chapter 11 cases;
  • Maintain its network of customer programs throughout this process. Customers can continue to arrange travel and fly with Avianca in the same way they always have. Additionally, Avianca customers will continue to accrue miles when they fly with Avianca, and can continue to redeem miles earned through LifeMiles™ to purchase tickets with Avianca during this process; and,
  • Honor various obligations owed to certain of its travel agency partners, vendors and suppliers from before the filing date. The Company will also continue to pay vendors and suppliers, as well as travel agency partners, in the ordinary course for goods and services provided on or after May 10, 2020.

The success of Avianca’s “first day” hearing marks the first significant milestone of the Company’s Chapter 11 case, and will allow it to both issue various critical payments and maintain operational continuity throughout its reorganization. With its requested relief granted, the Company can look forward to productively engaging with key stakeholders and other interested parties. Notably, the next Court hearing is currently scheduled for June 11, 2020, where Avianca hopes to secure approval of all interim orders on a final basis.

Ongoing Government Discussions

As previously announced, Avianca – like many other airlines around the world, including in the United States, the European Union, and Asia as well as in Latin America – is seeking financial support from the governments of the countries where it provides essential services. 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 critical additional liquidity to support the Company during 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. In the interim, while these discussions are ongoing, the Company intends to utilize its cash on hand, combined with funds generated from its ongoing operations (such as cargo), to support the business during the court-supervised reorganization process.

Top Copyright Photo: Avianca (Peru) Airbus A330-243 N279AV (msn 1279) MIA (Brian McDonough). Image: 925808.

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Avianca Holdings files for Chapter 11 reorganization, Peru to be shut down

Avianca Holdings, the parent of Avianca, has made this announcement:

Avianca Holdings S.A. and certain of its subsidiaries and affiliates on May 10, 2020 filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York to preserve and reorganize Avianca’s businesses. LifeMiles™, Avianca’s loyalty program, is administered by a separate company and is not part of the Chapter 11 filing.

The filing was necessitated by the unforeseeable impact of the COVID-19 pandemic, which has resulted in a 90% decline in global passenger traffic and is expected to reduce industry revenues worldwide by $314 billion, according to the International Air Transport Association. Avianca’s scheduled passenger operations have been grounded since mid-March, reducing its consolidated revenue by over 80% and placing significant pressure on its cash reserves.

Through the Chapter 11 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.

“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.”

“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. We greatly appreciate the dedication of our employees to Avianca and to serving the more than 30 million passengers that fly our airline each year. We remain committed to our purpose to connect people, families and businesses. Our customers can be confident that they can continue to depend on Avianca for safe, reliable and high-quality service, and our valued LifeMiles™ members can expect to accrue and redeem miles as normal,” Mr. Van der Werff continued.

Avianca – like many other airlines around the world, including in the United States, the European Union, and Asia as well as in Latin America – is seeking financial support from the governments of the countries where it provides essential services. 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. In the interim, while these discussions are ongoing, the Company intends to utilize its cash on hand, combined with funds generated from its ongoing operations (such as cargo), to support the business during the court-supervised reorganization process.

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.”

Measures to Protect Employees and Suppliers

As part of the process, Avianca has presented various motions before the Court in support of its reorganization and the Company expects the court to decide on these requests in the coming days. The Company has requested authority to pay certain prepetition employee wages, compensation and benefit obligations owed from before the filing date, as well as a request to continue paying wages and honoring employee benefit programs in normal day-to-day operations. Avianca has also requested authority to honor various prepetition obligations owed to certain of its travel agency partners, vendors and suppliers from before the filing date. The Company intends to pay vendors and suppliers, as well as travel agency partners in the ordinary course for goods and services provided on or after the filing date during its Chapter 11 process.

Continuing to Serve Customers

Avianca has also filed motions to maintain its network and customer programs throughout this process and customers can expect to continue to arrange travel and fly with Avianca in the same way they always have. Customers can expect to use tickets, vouchers and gift cards purchased before Avianca initiated this process. Avianca customers will continue to accrue miles when they fly with Avianca, and can continue to redeem miles earned through LifeMiles™ to purchase tickets with Avianca during this process. Additional frequent flyer benefits remain active, including access to VIP Lounges, priority check-in, upgrades and other benefits. Avianca also expects to continue to issue ticket refunds and honor travel coupons and payments or credits associated with baggage or service claims in adherence with our current policies. Given the impact COVID-19 has had on travel plans, Avianca will continue to waive change fees and other penalties associated with changes to customers’ travel plans for tickets purchased until October 31, 2020.

When COVID-19 travel restrictions are lifted, Avianca plans to resume passenger flights with the strictest biosafety protocols.

“Avianca 2021” Plan and COVID-19 Impact

Last year, Avianca successfully launched the “Avianca 2021” plan, and throughout 2019 and in the first two months of 2020, the Company had achieved significant positive results from this plan. Through the plan, the Company redesigned its network with 130 routes to 76 destinations in 27 countries, adding to the launch of a new pricing model “branded fares” in domestic markets in Ecuador and Colombia, including flights to and from Europe. These initiatives, along with customer-centric programs, had resulted in improved operational indicators, with a passenger-itinerary-completion rate of 98.7 percent and a 6-point increase in customer satisfaction. Consistent with the plan, in early 2020 the Company concluded a successful out-of-court reprofiling of its financial debt and lease obligations and raised $375 million in new financing.

However, just as is the case with other airlines around the world, Avianca’s operations have been dramatically impacted by the COVID-19 pandemic and resulting government-mandated air travel restrictions, while the Company continues to have high fixed costs. Of the total number of countries in which Avianca operates, 88 percent have total or partial passenger air transport restrictions, forcing the airline to take a series of extraordinary and structural measures. These have included employee furloughs, temporary wage reductions, reductions in non-essential capital expenditures and temporary deferred payments on long-term leases. Avianca has limited visibility as to when current travel restrictions will be lifted and, once such restrictions are lifted, it does not expect revenues to return to pre-pandemic levels in the short-term as the effects on travel are expected to be long-lasting. These factors, coupled with Avianca’s substantial financial obligations, made it necessary for Avianca to explore alternatives to reorganize its operations and restructure its debt.

Peru Operations

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.

Chapter 11 Process and Advisors

The Chapter 11 process is a well-established legal process in the United States of America that is recognized by other countries around the world. The process is a temporary one that, according to U.S. law, allows a company to reorganize and complete a financial restructuring under the supervision of the U.S. court system, while continuing its operations under the oversight of its board of directors and management team. Many companies, including many airlines, have used the Chapter 11 process to reorganize their financial obligations and emerge as stronger organizations. Avianca itself underwent a Chapter 11 process in 2003 that allowed it to position itself for expansion in Latin America.

To best position Avianca to successfully complete the Chapter 11 process, the Company’s Board of Directors has retained world-class advisors, including Seabury Securities LLC and FTI Consulting, which are serving as financial advisors to Avianca, as well as Milbank LLP, Smith, Gambrell & Russell, LLP, Gómez-Pinzón Abogados and Urdaneta, Vélez, Pearl & Abdallah Abogados, which are serving as legal counsel. The Company’s Board of Directors has also been advised by Willis Towers Watson, an independent compensation consultant, in the establishment of best-practices retention programs for certain employees who are essential to the Company’s Chapter 11 reorganization.

Avianca (Colombia) aircraft photo gallery:

United Airlines expands partnership with Copa Airlines and Avianca

United Airlines Boeing 777-224 ER N78017 (msn 31679) (Star Alliance) LHR (Keith Burton). Image: 944609.

United Airlines today announced it has reached an agreement with Compañía Panameña de Aviación S.A. (Copa Airlines), Aerovías del Continente Americano S.A. (Avianca) and many of Avianca’s affiliates, for a joint business agreement (JBA) that, pending government approval, is expected to provide substantial benefits for customers, communities and the marketplace for air travel between the United States and 19 countries in Central and South America.

Many more choices for customers

By integrating their complementary route networks into a collaborative revenue-sharing JBA, United, Avianca and Copa plan to offer customers many benefits, including:

  • Integrated, seamless service in more than 12,000 city pairs
  • New nonstop routes
  • Additional flights on existing routes
  • Reduced travel times

Drive economic benefits for consumers and the communities we serve

The carriers expect the JBA to drive significant traffic growth at major gateway cities coast to coast, which is expected to help bring new investment and create more economic development opportunities. Further, the JBA is expected to provide customers with expanded codeshare flight options, competitive fares, a more streamlined travel experience and better customer service, resulting in significant projected consumer benefits.

Better serve our customers

Additionally, allowing the three carriers to serve customers as if they were a single airline is expected to enable the companies to better align their frequent flyer programs, coordinate flight schedules and improve airport facilities.

“This agreement represents the next chapter in U.S.-Latin American air travel,” said Scott Kirby, United’s president. “We are excited to work with our Star Alliance partners Avianca and Copa to bring much-needed competition and growth to many underserved markets while providing a better overall experience for business and leisure customers traveling across the Western Hemisphere.”

“We are delighted to further solidify our existing partnership with United Airlines and look forward to increasing service options for our customers by working more closely with Avianca,” said Pedro Heilbron, Copa Airlines’ chief executive officer. “We believe this agreement benefits our passengers by providing competitive fares and a superior network of more than 275 destinations throughout Latin America and the U.S., and promotes further growth and innovation within the airline industry in the Americas.”

“We are certain that together we are stronger in the United StatesLatin America market than any of the three airlines individually,” said Hernan Rincon, Avianca’s executive president – chief executive officer. “This partnership will allow Avianca to strengthen its position as a first-level player in the airline industry in America as we will expand our scope in the continent with United and Copa, offering better connectivity to our customers.”

JBAs drive competition that benefits customers

Although JBAs have been proven around the world to benefit consumers and enhance competition, currently 99 percent of the U.S. carrier passenger traffic that makes connections in Central and South America does so without a JBA. Competition in the U.S.-Latin American market has grown and includes a diverse set of carriers offering service across multiple price points. Yet the market lacks a comprehensive revenue-sharing, metal-neutral network of carriers and the associated heightened competitive forces that drive value and better consumer experiences. The JBA represents an innovative, best-in-class new product offering that will make competition in this robust market even stronger.

“Our analysis shows that a metal-neutral JBA among United, Copa and Avianca will provide substantial benefits to consumers traveling between the relevant countries,” said Dr. Darin Lee, executive vice president of economic consulting firm Compass Lexecon and airline industry expert. “This JBA will enable United, Copa and Avianca to compete more effectively, offer competitive fares, and increase service, encouraging innovation and establishing a more robust and vibrant marketplace.”

To enable the deep coordination required to deliver these benefits to consumers, communities and the marketplace, United, Copa and Avianca plan to apply in the near term for regulatory approval of the JBA and an accompanying grant of antitrust immunity from the U.S. Department of Transportation and other regulatory agencies. The parties do not plan on fully implementing the JBA until they receive the necessary government approvals. The JBA currently includes cooperation between the U.S. and Central and South America, excluding Brazil.  With the recently concluded Open Skies agreement between the U.S. and Brazil, the carriers are exploring the possibility of adding Brazil to the JBA.

Top Copyright Photo (all others by the airlines): United Airlines Boeing 777-224 ER N78017 (msn 31679) (Star Alliance) LHR (Keith Burton). Image: 944609.

United aircraft slide show (Boeing):

Avianca is coming to Chicago and Orlando with new routes

Avianca (Costa Rica) Airbus A320-233 N495TA (msn 3103) MIA (Tony Storck). Image: 926153.

The Avianca Group is adding new routes from Central America and South America to the United States. New daily service from Guatemala City to Chicago (O’Hare) will start on April 1, 2019. The new route will be operated by Avianca Costa Rica (formerly LACSA) and Airbus A320 aircraft according to Airline Route.

The carrier is also starting Guatemala City – Orlando service on August 2, 2018, three days a week, with Airbus A319s.

Additionally Avianca (Peru) will add the daily Lima – Orlando route on August 1, 2018 with Airbus A319 aircraft.

Finally Avianca (El Salvador) will add the San Salvador – Boston route on August 17, 2018. The route will be operated two days a week.

Copyright Photo: Avianca (Costa Rica) Airbus A320-233 N495TA (msn 3103) MIA (Tony Storck). Image: 926153.

Avianca (Costa Rica) aircraft slide show: