Avianca Airlines Goes Bankrupt & Discontinues Services in Peru
Like all businesses hit hard by Covid-19 pandemic, companies operating in the travel industry have been crippled, some to the point of collapse. On May 10, Avianca airlines, the third largest airline in South America, filed for Chapter 11 Bankruptcy to protect and reorganize the remaining fragments of the 100 year old company.
Avianca Discontinues Flights in Peru.
As part of the restructuring, Avianca is shutting down its business in Peru, so the Colombia-based airline can focus on the essential markets in Colombia and other prominent routes in Latin America. Avianca passenger flights have been grounded since the middle of March forcing most of the 189 plane fleet to sit idle.
Avianca is a partner in the Star Alliance industry group and the loyalty program is an important benefit. LifeMiles members may wonder how the bankruptcy will impact the frequent flyer program and the use of award miles. Fortunately, LifeMiles operates as a separate entity and is not included in the bankruptcy. LifeMiles members can earn and redeem points as long as they go through the Avianca Airline system. Avianca extended the status of elite members through January 2022. The greatest risk of loss is if Avianca Airlines goes out of business completely. Even then, LifeMiles could rise up and function as a stand alone company allowing members to redeem points for products and services.
From the Avianca website:
"The expiration of those miles that were scheduled between April 1 and December 31, 2020 will be paused. This will be done automatically without the need for customers to contact the airline."
For the time being, the airline is striving to retain as much of the core of their operations as possible, provide jobs, and minimize the negative impact on members. But the long term viability of the company depends a lot on what happens with the bankruptcy and how successful the Avianca leaders are with regaining the confidence of worried members and restoring the financial stability of the company. Avianca was dealing with financial problems well before covid-19 came along.
All of this doesn't mean that services can't or won't ever be restored in Peru. Rules are constantly changing and it's worth it to check the Avianca website from time to time.
Update September 14, 2020. Colombia's $370 million USD emergency loan to Avianca is blocked by a court.
The story has several interesting factors, like, the sister of Colombia's President is a senior vice president at Avianca. The lawsuit was filed by a citizen who claimed the loan was a threat to the use of public resources. Here's a link to Finance Colombia so you can read all the details.
Latam Airlines Files for Bankruptcy protection on May 26, 2020. (follow this link to read more)
The big difference between these 2 airlines is that Avianca had been dealing with fiscal mismanagement and financial losses well before the corona virus hit. Latam airlines had been profitable until corona virus and the Chapter 11 will give them a chance to reorganize their assets and debts.
I try to stay updated on the status of international flights and border reopenings in South America. I am in constant touch with our teams on the ground and I frequently post news and videos on our social media pages. You'll find links to all our social media accounts at the very bottom of every page in our website. Recently, Vidal, in Cusco, and I have been able to set up zoom videos with updated information about flights from the Us and Canada, as well as info about entry to Machu Picchu.