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The problem, at least as both competitors and Colombian airline regulators saw it, was that a combined Avianca – Viva merger would control too much of Colombia’s domestic aviation market. Aerocivil, Colombia’s civil aviation regulatory authority originally rejected the merger, but then on appeal by the two airlines, Colombia’s Ministry of Transportation (Mintransporte) ordered Aerocivil to at least reconsider the deal, which it is currently (as of publication) doing. All parties expect a ruling shortly.

Complicating the situation, competing airlines Jetsmart and Latam, both out of Chile, have in the last month, submitted competing offers for Viva, much to the consternation of Viva’s controlling shareholders. The way this plays out may mean the difference between dominance and diminution for Avianca, though with multiple suitors, the survival of Viva seems to be more secure than last autumn when Aerocivil first ruled against their deal.

Here are some of the major actors in the hunt to acquire Viva:

MOBI FIA — MOBI Fundo de Investimento em Ações Investimento no Exterior was the controlling shareholder of Brazil’s GOL airlines, controlled by Constantino de Oliveira Junior.

GOL — Founded in 2001, GOL Linhas Aéreas Inteligentes S.A. (NYSE: GOL e B3: GOLL4) is Brazil’s largest airline. Operating on the low-cost model, Gol is primarily a domestic airline serving many Brazilian cities, but also flies to several international destinations throughout Latin America.

Avianca — Once controlled by Germán Efromovich, a South American Magnate with ties to Bolivia, Brazil and Colombia, he lost control when he defaulted on a loan from US based United Airlines collateralized by his controlling interest in Avianca.

South American magnate & former Avianca chairman Germán Efromovich

Avianca was founded in Barranquilla, Colombia by German entrepreneurs over 100 years ago, but had its corporate domicile in Panamá. After filing for bankruptcy, Avianca still has a Colombian base of operations but is domiciled in London.

Today, Avianca is owned by private equity firm Elliott International L.P., United Airlines controlled South Lake One LLC, and Kingsland International Group, which is controlled by Efromovich nemesis, El Salvador magnate Roberto Kriete. Kriete’s father started TACA airlines which Kriete merged with Avianca in 2013, giving him a minority stake in Avianca through his Kingsland Holdings. Kriete and Efromovich soon fell out though, after Kriete accused Efromovich of mismanagement and self-dealing. Ironically, Kriete opposed Avianca’s dealings with United Airlines.

In May of 2022, Avianca shareholders, through a vehicle called Castlesouth Limited, acquired a controlling economic interest in Fast Colombia S.A.S., the legal name of the airline known as Viva. Avianca could not yet take voting or operational control of Viva as the deal would have to be approved with regulators. It is analogous to acquiring non-voting shares in a company. Avianca shareholders also hold a convertible debt instrument from Chilean low-cost carrier Sky Airline S.A. In other words, Sky owes money to Avianca through a loan, but that loan can be converted into equity.

United Airlines — One of the largest legacy carriers in the United States, United (NASDAQ GS UAL) participates with Avianca and Panamá’s Copa Airlines in the Star Alliance. United became a major shareholder in Avianca when Germán Efromovich defaulted on a $400 million USD loan from United collateralized with Avianca shares. Apparently Efromovich took out the loan in an attempt to save his faltering Brazilian and Argentine airlines, which eventually failed.

United now holds its interest in Avianca through an entity called South Lake One LLC.

Abra Group — MOBI FIA entered into a deal with Avianca’s owners, South Lake One, Kingsland International Group, and Elliott International to combine GOL and Avianca under one UK-based holding group called Abra Group Limited, while retaining separate brands (at least initially). The new entity would conceptually look something like Europe’s International Airlines Group, that operates European airline brands Iberia, British Airways, Aer Lingus, Level and Vueling under one umbrella holding company. The Abra Group also seeks to add Viva to this, but so far their plans have been thwarted by Colombian regulators.

Roberto Kriete is chairman of Avianca, Abra Group, and Kingsland Holdings

Roberto Kriete is the chairman, Constantino de Oliveira Junior is the CEO, while Avianca’s CEO Adrian Neuhauser and GOL’s CFO Richard Lark are co-Presidents.

Jetsmart —Chilean low-cost airline that has also announced its desire to buy Viva. Jetsmart is majority-controlled by US-based Indigo Partners, an aviation private equity firm. American Airlines also has a minority stake in Jetsmart, though American is said to be interested in taking a stake in Colombian low-cost airline startup Ultra Air.

Jetsmart already flies between Colombia and Chile, but the airline has also been seeking entry into Colombia’s domestic aviation market. Last year, Colombian regulators tabled but did not reject Jetsmart’s entry, asking for more information on the airline’s relationship with American Airlines, and also expressing doubt that Jetsmart had the fleet capacity. This year, Jetsmart is due to take delivery of 14 new Airbus A320neo and A321neo aircraft, and has the stated ambition of a 100 aircraft fleet by 2026.

Indigo Partners — US-based aviation focused private equity firm established by William Franke. Indigo is an investor in Norway’s Wizz Air, Frontier Airlines in the US, Volaris in México, Cebu Pacific in the Philippines, and Canada’s Enerjet. Indigo also invested in Spirit Airlines and Tiger Airways. Though Indigo is an investor in Volaris with Kriete and Kingsland Holdings, its Jetsmart is acting against the interests of Kriete’s Kingsland, Avianca and Abra Group by competing for Viva.

Latam—Another Chilean airline, Latam is the largest airline based in South America, though it holds a minority position in the Colombian market. Latam was formed in 2012 when Chilean LAN and Brazilian TAM agreed to merge. The airline rebranded itself from the LAN and TAM brands to LATAM in 2015. Latam participated with American Airlines in the Oneworld alliance, but Delta Airlines broke that when it took a 20% financial stake in Latam in 2019. Qatar Airways also has a minority stake in Latam. This month, Latam also announced its intentions to compete for the acquisition of Viva.

Castlesouth—Castlesouth Limited is the UK based entity that acquired the majority economic interest in Viva air last year from Irelandia Aviation, but must wait on approval from regulators before it, Avianca, or Abra can take over voting and operational control. Castlesouth, like Avianca, is owned by Kingsland Holdings, Elliott Management, and South Lake One (United Airlines). Castlesouth through its lawyers,  Philippi Prietocarrizosa Ferrero DU & Uría, has publicly stated its strong preference for its deal to go through between Avianca and Viva rather than between Viva and competitors Jetsmart or Latam; to be expected as Castlesouth is controlled by Avianca’s shareholders.

Elliott International — Elliott International is an investment vehicle owned by Elliott Investment Management, a US based hedge fund controlled by billionaire Paul Singer. In the past Elliott has invested in projects of former Avianca controlling shareholder Germán Efromovich, and has since then held interests in Avianca through its bankruptcy to the present.

Irelandia Aviation —An aviation private equity firm with a track record of successfully developing early-stage airlines. Irelandia was instrumental in the launch and growth of Viva, and also Mexico’s Viva Aerobus, Singapore’s Tiger Air (now merged with Scoot), US-based Allegiant, and its original success, Ryanair.

Viva was the brainchild of Mexican entrepreneur William Shaw, who now runs Ultra Air.

Kingsland Holdings — This is the investment vehicle of El Salvador tycoon Roberto Kriete. Kingsland Holdings holds Kriete’s shares in Avianca, and in Mexican low-cost carrier Volaris. Kriete’s father founded TACA airlines which merged with Avianca in 2013. Though Kriete sued Avianca because of its dealings with United Airlines, United ended up installing Kriete as Avianca’s chairman after ousting Germán Efromovich, who initially did the deal with Kriete. Kingsland is now a shareholder of Abra Group, and of Castlesouth Limited.

Viva — The subject of it all, Fast Colombia S.A.S. was the brainchild of Mexican entrepreneur William Shaw, Juan Posada, Gabriel Migowski, and Frederik Jacobsen. The concept of a Colombian low-cost airline was actually the subject of Shaw’s Stanford University MBA thesis. The four presented the idea to Irelandia Aviation’s Declan Ryan who agreed to fund the startup, along with other investors, such as Colombian insurance and banking concern Grupo Bolivar. None of the founders remain with the airline, though Shaw went on to form competing low-cost carrier Ultra Air, and is a vocal opponent of the Viva-Avianca merger. Viva also owns a Peru subsidiary that operates domestic routes throughout the neighboring country.

Viva is run by Argentine-born former Latam executive Felix Antelo, who has guided the company through rapid international expansion and the COVID pandemic. Unlike Avianca and LATAM, under Antelo’s leadership, Viva has been able to avoid filing for COVID-related bankruptcy, though the company has recently entered a voluntary debt mediation process under Colombian law. UPDATE: Felix Antelo resigned last week and has been replaced by Viva executive Francisco “Pacho” Lalinde.

Viva is run by Felix Antelo

Viva’s growth has come largely at the expense of Avianca, with Avianca carrying 36.3% of Colombian domestic passengers, and Viva at 16.2%. Before Viva’s launch and a devastating pilot strike and lawsuits between shareholders Kriete and Efromovich, Avianca controlled over 60% of domestic traffic. Viva is quick to point out that their low-cost model also competes with terrestrial bus lines in Colombia and Peru, and the airline is proud of how many passengers have flown for the first time with Viva because of its accessible fares.

Latam held 20% market participation, Wingo, a Colombian low-cost subsidiary of Panamanian carrier Copa held 4.5%, Easyfly, a Colombian carrier specializing in smaller cities had 4%, and government owned Satena, which flies to more remote destinations, 2.9%. Other airlines held 18.1% of the market. Ultra air has rapidly been growing and this year we can expect it to have gained significant market share.

Viva’s management has issued several carefully worded statements urging the Colombian government to approve its acquisition by Viva, though both airlines prefer to call it an “integration” as Viva and Avianca shares would have a common owner. Avianca has pledged that Viva would continue to operate separately under its own brand.

American Airlines — American Airlines (NASDAQ: AAL) holds a minority stake in Jetsmart, which has submitted an offer for Viva. American Airlines had a close working relationship with Latam which was ruptured when competing US legacy airline Delta took a stake in Latam, as the airline seeks to expand its presence in South America.

Delta Airlines — Delta Airlines (NYSE: DAL) holds a minority stake in Latam, which has submitted an offer for Viva.

Qatar Airways — Qatar Airlines holds a minority stake in Latam, which has submitted an offer for Viva.

Sky Airline – This Chilean low-cost carrier owes money in the form of a convertible loan to the shareholders of the Abra Group. This loan could conceivably convert to equity, in which case the Abra Group would also become a part owner of Sky.

Ultra Air — Colombian low-cost carrier formed by Viva co-founder William Shaw, who after several years, left Viva on somewhat bitter terms after building the company and finally serving a short stint as CEO. Though the airline was his brainchild, he never had control of the airline’s board, and his shares in the company became diluted though multiple capital raises. On behalf of Ultra, Shaw has been a vocal opponent of the Avianca-Viva merger.

Analysis: A missed connection?

Should Abra Group manage to consolidate Avianca, Viva, and Gol, it could potentially dominate the South American airline market, especially the Colombian domestic market where it would have a dominant position. Strong competition would remain for international routes from carriers like Latam and Copa. On the other hand, should Jetsmart or Latam manage to acquire Viva, it would spell bad news for Avianca, which would continue to face a strong competitor, now financially rejuvenated. Avianca, once known as offering a higher-end passenger experience, now suffers from a dismal reputation with travelers, and a muddled brand that is stuck somewhere between a legacy full-service carrier and a low cost competitor to Viva.

If Avianca’s shareholders are unable to acquire control of Viva, they will have to seriously revamp its brand strategy and determine an identity, because Colombia’s aviation market is becoming intensely competitive. New airlines are entering; we already have spoken of Ultra Air, but other new carriers are coming such as Arajet. Low-cost carrier Wingo is still relatively small, but is wholly owned by Panamá’s Copa, which is financially very healthy and enjoys an excellent market position.

A decision regarding the Avianca-Viva tie up is due soon. Should Aerocivil reject the deal again, expect Avianca shareholders, through Castlesouth to fight it again, conceivably appealing as far as Colombia’s supreme court. Avianca has stated publicly that the acquisition is to save Viva, but there is no doubt that this deal is critical to Avianca’s survival strategy, as Viva has been Avianca’s single biggest competitive threat.

In any case, it is unlikely that Viva will be alone for long, as alternative deep pocketed suitors remain in a holding pattern.

Stay tuned, and be sure to subscribe to Finance Colombia for timely updates and breaking news on this and other important deals relevant to investors and executives active in Colombia.

Viva and competing carrier Avianca have both expressed a degree of frustration with the Colombian government, as the merger proposed by the two airlines last year was first rejected by Aerocivil, Colombia’s civil aviation authority, and then on appeal to Colombia’s transportation ministry, the initial denial was overturned and while the merger was not approved, but sent back to Aerocivil for reconsideration. To further complicate things, at least for Avianca as Viva’s suitor, Just this week, Chilean low-cost carrier Jetsmart submitted a competing offer for Viva that would overcome the market dominance objections raised by Aerocivil.

Viva said in a written statement: “Viva is taking advantage of this 90-day voluntary recovery process in order to restructure its debts through negotiation with its primary creditors allowing the airline to continue operating under sustainable conditions that guarantee the continuity of the company. This decision comes after six months of waiting for the definition of the alliance with Avianca, which if approved would allow us to continue in the low-cost aviation business through our link to another group of regionally important airlines, thereby ensuring the preservation of jobs, and strengthening our commitment to generating higher levels of connectivity in the country at a low cost by obtaining the required capital injection.”

Colombia’s “Proceso de Recuperación Empresarial” (PRE)

Created during the COVID-19 pandemic, Colombia’s “Business Recovery Process” is a mediated, non-judicial process mediated by reconciliation centers through any of Colombia’s regional chambers of commerce. Unlike in other countries, the chambers of commerce have an official function in Colombia, as the repository of articles of incorporation for the organization of business entities. In other words, when one registers a business in Colombia, it is done through the local Chamber of Commerce rather than at a government office such as state secretaries in the US or Companies House in the UK.

Details of Colombia’s PRE:

• Filed with the local Chamber of Commerce, not a judicial court
• Maximum duration of three months
• Facilitates debt renegotiation with creditors
• Suspends coercive collections such as repossessions, evictions & foreclosures
• Though mediated, has the force of law
• The debtor may ask for judicial validation, extending terms to all creditors, whether participants in the mediation or not

“Viva has taken this step due to the crisis it faces because of the effects of Covid 19 and the current macroeconomic factors that are public knowledge. Additionally, the company has not been able to access capital during the last nine months since it has not yet been possible to implement its integration with another airline, which is still pending authorization by the national government,” said the airline in a statement.

“After studying all the available alternatives to the current situation, we are entering this voluntary mediation process while we urgently wait for the decision by the authority on our alliance with Avianca. Just as we have adapted in the past, we are convinced that we will be able to overcome this situation for the good of all passengers who have benefited from the low-cost model in which we are experts.”

“This filing of the plan represents an important milestone as we continue toward the successful completion of our financial and operational restructuring. The company has made significant progress in repositioning and simplifying the business with the adoption of more competitive pricing for passengers, continuing our aircraft reconfiguration process, expanding our network routes both domestically and internationally – establishing Avianca as the most robust airline in Latin America – securing long-term labor agreements and strengthening relationships with pilots and other employee groups,” said Avianca in a statement.

The next step in the Chapter 11 process will be a hearing for the United States Bankruptcy Court to consider the approval of the disclosure statement, which is scheduled for September 14, 2021. Avianca says it is currently not soliciting votes on its plan of reorganization and will not solicit votes on its plan until the bankruptcy court approves the disclosure statement.

“Any relevant information in the Chapter 11 process will be disclosed to the market in a timely manner. Avianca remains committed to connecting people, territories and businesses under a value proposition that meets the needs of today’s passenger, with the best customer service and the highest safety standards. Avianca will continue building on our 100-year legacy to emerge as a financially stronger, more efficient airline, well positioned for long-term success,” said the airline.

—————————————————————————————–––		x
		:
In re:		:		Chapter 11
		:
AVIANCA HOLDINGS S.A. et al.,1		:		Case No. 20-11133 (MG)
		:
Debtors.		:		(Jointly Administered)
		:
—————————————————————————————–––		x

NOTICE OF HEARING ON DEBTORS’ MOTION FOR ENTRY OF AN ORDER (I) APPROVING THE DISCLOSURE STATEMENT; (II) APPROVING SOLICITATION AND VOTING PROCEDURES; (III) APPROVING FORMS OF BALLOTS; (IV) ESTABLISHING PROCEDURES FOR ALLOWING CERTAIN CLAIMS FOR VOTING PURPOSES; (V) SCHEDULING A CONFIRMATION HEARING; AND (VI) ESTABLISHING NOTICE AND OBJECTION PROCEDURES

1

The Debtors in these chapter 11 cases (the “Chapter 11 Cases”), and each Debtor’s federal tax identification number (to the extent applicable), are as follows: Avianca Holdings S.A. (N/A); Aero Transporte de Carga Unión, S.A. de C.V. (N/A); Aeroinversiones de Honduras, S.A. (N/A); Aerovías del Continente Americano S.A. Avianca (N/A); Airlease Holdings One Ltd. (N/A); America Central (Canada) Corp. (00-1071563); America Central Corp. (65-0444665); AV International Holdco S.A. (N/A); AV International Holdings S.A. (N/A); AV International Investments S.A. (N/A); AV International Ventures S.A. (N/A); AV Investments One Colombia S.A.S. (N/A); AV Investments Two Colombia S.A.S. (N/A); AV Loyalty Bermuda Ltd. (N/A); AV Taca International Holdco S.A. (N/A); Aviacorp Enterprises S.A. (N/A); Avianca Costa Rica S.A. (N/A); Avianca Leasing, LLC (47-2628716); Avianca, Inc. (13-1868573); Avianca-Ecuador S.A. (N/A); Aviaservicios, S.A. (N/A); Aviateca, S.A. (N/A); Avifreight Holding Mexico, S.A.P.I. de C.V. (N/A); C.R. Int’l Enterprises, Inc. (59-2240957); Grupo Taca Holdings Limited (N/A); International Trade Marks Agency Inc. (N/A); Inversiones del Caribe, S.A. (N/A); Isleña de Inversiones, S.A. de C.V. (N/A); Latin Airways Corp. (N/A); Latin Logistics, LLC (41-2187926); Nicaragüense de Aviación, Sociedad Anónima (N/A); Regional Express Américas S.A.S. (N/A); Ronair N.V. (N/A); Servicio Terrestre, Aereo y Rampa S.A. (N/A); Servicios Aeroportuarios Integrados SAI S.A.S. (92-4006439); Taca de Honduras, S.A. de C.V. (N/A); Taca de México, S.A. (N/A); Taca International Airlines S.A. (N/A); Taca S.A. (N/A); Tampa Cargo S.A.S. (N/A); Technical and Training Services, S.A. de C.V. (N/A). The Debtors’ principal offices are located at Avenida Calle 26 # 59 – 15 Bogotá, Colombia.

PLEASE TAKE NOTICE that a hearing (the “Hearing”) will be held at 10:00 AM (prevailing Eastern Time) on September 14, 2021 before the Honorable Martin Glenn, United States Bankruptcy Judge, United States Bankruptcy Court for the Southern District of New York, One Bowling Green, New York, New York 10004 to consider the Debtors’ Motion for Entry of an Order (I) Approving the Disclosure Statement; (II) Approving Solicitation and Voting Procedures; (III) Approving Forms of Ballots; (IV) Establishing Procedures for Allowing Certain Claims for Voting Purposes; (V) Scheduling a Confirmation Hearing; and (VI) Establishing Notice and Objection Procedures (the “Motion”).

PLEASE TAKE FURTHER NOTICE that the Hearing will be conducted remotely via Zoom for Government. Parties wishing to appear at the Hearing, whether in a “live” or “listen only” capacity, must make an electronic appearance through the “eCourtAppearances” tab on the Court’s website (https://www.nysb.uscourts.gov/content/judge-martin-glenn) no later than 4:00 p.m. (prevailing Eastern Time) the business day before the Hearing (the “Appearance Deadline”). Following the Appearance Deadline, the Court will circulate by email the Zoom link to the Hearing to those parties who have made an electronic appearance. Parties wishing to appear at the Hearing must submit an electronic appearance through the Court’s website by the Appearance Deadline and not by emailing or otherwise contacting the Court. Additional information regarding the Court’s Zoom and hearing procedures can be found on the Court’s website.

PLEASE TAKE FURTHER NOTICE that any objections or responses to the relief requested in the Motion shall: (a) be in writing; (b) conform to the Federal Rules of Bankruptcy Procedure, the Local Bankruptcy Rules for the Southern District of New York, all General Orders applicable to chapter 11 cases in the United States Bankruptcy Court for the Southern District of New York, and the Case Management Order; (c) be filed electronically with this Court on the docket of In re Avianca Holdings S.A., Case 20-11133 (MG) by registered users of this Court’s electronic filing system and in accordance with the General Order M-399 (which is available on this Court’s website at https://www.nysb.uscourts.gov) by September 7, 2021, at 4:00 PM (prevailing Eastern Time); and (d) be served on the following parties: (i) the Chambers of the Honorable Martin Glenn, United States Bankruptcy Court for the Southern District of New York, One Bowling Green, New York, NY 10004 (mg.chambers@nysb.uscourts.gov); (ii) the Debtors, Avenida Calle 26 No. 59-15 Bogotá D.C., Colombia (Attn: Richard Galindo (richard.galindo@avianca.com)); (iii) Milbank LLP, 55 Hudson Yards, New York, New York 10001, (Attn: Evan R. Fleck, Esq., Gregory A. Bray, Esq., and Benjamin M. Schak, Esq. (efleck@milbank.com, gbray@milbank.com, and bschak@milbank.com)), counsel for the Debtors; (iv) Willkie Farr & Gallagher LLP, 787 Seventh Avenue, New York, NY 10019 (Attn: Brett H. Miller, Esq. and Todd M. Goren, Esq. (bmiller@willkie.com and tgoren@willkie.com)), counsel to the Official Committee of Unsecured Creditors (the “Committee”); (v) U.S. Department of Justice, Office of the U.S. Trustee, 201 Varick Street, Room 1006, New York, NY 10014 (Attn: Brian Masumoto, Esq. and Greg Zipes, Esq. (brian.masumoto@usdoj.gov and greg.zipes@usdoj.gov)); (vi) the Securities and Exchange Commission, 100 F Street, NE, Washington, D.C. 20549; and (vii) the Federal Aviation Administration, 800 Independence Ave., S.W. Washington, DC 20591 (Attn: Office of the Chief Counsel).

PLEASE TAKE FURTHER NOTICE that if no objections are timely filed and served with respect to the Motion, the Debtors shall, on or after the objection deadline, submit to the Court an order substantially in the form annexed as Exhibit A to the Motion, which order the court may enter with no further notice or opportunity to be heard.

PLEASE TAKE FURTHER NOTICE that copies of the Motion and other pleadings for subsequent hearings may be obtained free of charge by visiting the KCC website at https://www.kccllc.net/avianca. You may also obtain copies of any pleadings by visiting at https://www.nysb.uscourts.gov in accordance with the procedures and fees set forth therein.

PLEASE TAKE FURTHER NOTICE that your rights may be affected.You should read the Motion carefully and discuss them with your attorney, if you have one. If you do not have an attorney, you may wish to consult with one.

PLEASE TAKE FURTHER NOTICE that the Hearing may be continued or adjourned thereafter from time to time without further notice other than an announcement of the adjourned date or dates at the Hearing or at a later hearing.

Dated: August 10, 2021
New York, New York
				/s/ Evan R. Fleck
				Dennis F. Dunne
				Evan R. Fleck
				Benjamin Schak
				MILBANK LLP
				55 Hudson Yards
				New York, New York 10001
				Telephone:		(212) 530-5000
				Facsimile:		(212) 530-5219
				– and –
				Gregory A. Bray
				MILBANK LLP
				2029 Century Park East, 33rd Floor
				Los Angeles, CA 90067
				Telephone:		(424) 386-4000
				Facsimile:		(213) 629-5063
				Counsel for Debtors and
				Debtors-In-Possession

If you have any questions related to this notice, please call (866) 967-1780 (U.S./Canada), or +1 (310) 751-2680 (International). Court filings and other documents related to the Chapter 11 process in the U.S. are available at www.kccllc.net/avianca.

Si tiene alguna pregunta relacionada con es te aviso, llame al (866) 967-1780 (EE. UU. / Canadá) o al +1 (310) 751-2680 (internacional). Los archivos judicales y otros documentos con el proceso del Capitulo 11 en los EE. UU. Están disponibles en www.kccllc.net/avianca.

]]> https://www.financecolombia.com/avianca-files-reorganization-plan-with-us-bankruptcy-court/feed/ 1 https://www.financecolombia.com/liquidation-begins-of-avianca-peru/ Sun, 24 May 2020 13:34:31 +0000 https://www.financecolombia.com/?p=20510 After parent company  Avianca Airlines (NYSE: AVH, BVC, PFAVH) filed for chapter 11 bankruptcy in the United States Bankruptcy Court for the Southern District of New York.  the Board of Directors of Avianca Peru S.A., the Peruvian subsidiary of the Company agreed to terminate its operations in Peru and begin a dissolution and liquidation process under local Peruvian law in order to preserve and protect Avianca’s businesses in the face of the Coronavirus COVID-19 pandemic & economic crisis.

In the future, Avianca says it will continue to serve routes to and from Peru through its airline subsidiaries in Colombia, El Salvador and Ecuador, once the restrictions imposed by the authorities under the current health emergency are lifted. For customers with valid tickets purchased directly to or from Peru, several exchange, reaccomodation and voucher options will be available.

Process implementation

A General Shareholders Meeting of Avianca Peru agreed to proceed with a voluntary liquidation and dissolution of Avianca Peru. Currently, the liquidation proceeding is in process of liquidating liabilities and assets of such entity. Such process is under the supervision of Estrategia Consultores S.A.C, the designated independent liquidator. Although the agreement of the General Shareholders’ Meeting has already been published, its registration in the Public
Registry of Peru is pending due to the fact the offices in which said registration must be made are closed due to the state of emergency in such country. Under this liquidation process, the payment of social benefits of the employees of Avianca Peru will have priority within the framework of the liquidation. Avianca Peru employs 906 employees.

The airline previously stopped paying debt and certain expenses and had warned that it did not have enough cash on hand to continue making payroll. Pilots in Peru have already initiated labor actions against the airline, and the carrier faces public opposition in Colombia to a direct government rescue.

Those with claims against Avianca may contact Avianca’s claims agent, Kurtzman Carson Consultants, at www.kccllc.net/avianca. Information is also available by calling (866) 967-1780 (U.S./Canada) or +1 (310) 751-2680 (International), as well as by email at www.kccllc.net/avianca/inquiry.

The airline already stopped paying debt and certain expenses and had warned that it did not have enough cash on hand to continue making payroll. Pilots in Peru have already initiated labor actions against the airline, and the carrier faces public opposition in Colombia to a direct government rescue.

Those with claims against Avianca may contact Avianca’s claims agent, Kurtzman Carson Consultants, at www.kccllc.net/avianca. Information is also available by calling (866) 967-1780 (U.S./Canada) or +1 (310) 751-2680 (International), as well as by email at www.kccllc.net/avianca/inquiry.

“Avianca is facing the most challenging crisis in our 100-year history as we navigate the effects of the COVID-19 pandemic,” said CEO Anko van der Werff. “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.”

The airline will abandon Peru

In a press release issued Sunday, Avianca revealed that “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.”

Expats, Visitors Stuck Inside (or outside) Colombia? Here Is What You Should Do Now

Avianca has filed motions with the US bankruptcy court 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 airline says that it 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.

LifeMiles redemptions continue

Avianca states that passengers 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 its current policies. Lifemiles is a separate legal company from Avianca, and is not included in the bankruptcy filing.

Avianca has created an information site, aviancawillkeeponflying.com to provide the company’s position on the bankruptcy filing.

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