Avianca Files for Chapter 11 Bankruptcy Protection

Avianca, Latin America’s second-largest airline and the second-oldest continually operating airline in the world, filed for bankruptcy on Sunday. The filing comes after the airline failed to meet a bond payment deadline.

Several small carriers have gone out of business during the coronavirus pandemic, but Avianca will be the first major airline to go under. Avianca’s pleas for coronavirus aid from Colombia’s government have so far been unsuccessful. The drop in travel demand in recent months has reduced revenue by over 80%, placing significant pressure on its cash reserves. Avianca was already in trouble, even before the pandemic.

The Bogota-based airline has not flown a regularly scheduled passenger flight since late March. 20,000 employees have not been paid through the current crisis.

Avianca filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York to preserve and reorganize Avianca’s businesses, it said in a statement. LifeMiles, Avianca’s loyalty program, is administered by a separate company and is not part of the Chapter 11 filing.

Impact for Customers

In its statement, Avianca said that 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.

With that said, I would still not go and purchase LifeMiles and would probably try to redeem as soon as possible. As mentioned above, LifeMiles is administered by a separate company, and you could potentially redeem for Star Alliance awards even if Avianca doesn’t recover. But that’s not a guarantee.