About Avianca Group International

Avianca Holdings S.A. (Avianca), through its subsidiaries, provides domestic and international, passenger and cargo air transportation, both in the domestic markets of Colombia, Ecuador, Costa Rica and Nicaragua; and international routes serving North, Central and South America, Europe, and the Caribbean. As of December 31, 2020, the company operated a fleet comprising 143 aircraft 132 passenger aircraft and 11 cargo aircraft), 82 of which were owned, 61 of which were subject to long-term leases and one under a short-term wet lease. For its freight operations, as of December 31, 2020, the company operated two 767F-200S, six Airbus A330F and three A300F. As of December 31, 2020, the average age of its operating passenger fleet was 8.11 years. Sources of Revenue Passenger The company’s principal product is scheduled passenger air transportation. It targets business travelers, which in 2020 represented 25% of its domestic and Latin American traffic. The company also targets leisure travelers with its extensive network. Leisure traffic tends to coincide with holidays, school schedules and cultural events and peaks in July and August and again in December and January, as well as during the Easter holiday in March/April. Cargo and Other In addition, the company generates revenue through its LifeMiles loyalty program and through its dedicated cargo operations, which transport express shipments to destinations across Latin America, the United States and Europe comprising air mail, air freight and air express services. The company’s other revenue activities include its courier transportation operations, which comprise shipment of small parcels between countries, on a door-to-door basis and with defined transit time commitments from carriers, as well as air transport-related services, such as maintenance, crew training and other airport services provided to third party carriers through its Avianca Services division, as well as service charges and ticket penalties. The company also generates revenue from aircraft and property leases, marketing rebates, duty-free sales and charter flights. Passenger Revenue The company’s passenger revenue primarily comprises ticket sales, including revenue from the redemption of miles under its LifeMiles loyalty program and ancillary revenue, which includes additional charges that are billed to passengers, such as fees for excess baggage, date, destination and name changes and special services relating to empty seats, unaccompanied minors and lounge passes. Domestic Passenger Revenue Colombia In Colombia, in 2020, approximately 80% of the company’s domestic passengers flew from or to Bogotá, 10% passed through Bogotá in transit to other points on its domestic route network and 10% were point-to-point travelers that did not travel to or through Bogotá. Ecuador As of December 31, 2020, the company operated approximately six daily domestic flights on five routes. International Passenger Revenue The company operates international routes through its airlines Avianca (Colombia), Taca International Airlines S.A. (El Salvador), Avianca Costa Rica S.A., and Avianca Ecuador S.A. Two of the company’s subsidiaries, Aviateca S.A. (Guatemala) and Taca de Honduras, operate their international routes through charter flights and wet leases with other of its subsidiaries. Regional Operations in Central America The company operates regional routes in Central America through its regional airlines, such as Isleña de Inversiones S.A. de C.V.—Isleña (Honduras) and Aviateca S.A. (Guatemala). Route Network and Schedule In 2020, prior to the onset of the COVID-19 pandemic, the company operated up to 686 daily scheduled flights to 76 destinations in North America, Central America, South America, and Europe. Its network combines strategically located hubs in Bogotá and San Salvador, as well as strong point-to-point service from and to different major destinations in North America, Central America, South America and Europe. The company also provides its passengers with access to flights to 140 additional destinations worldwide through code-share arrangements with Aeroméxico, All Nippon Airways, Air China, Air India, Air Canada, Azul, Copa, Etihad, EVA Airways, GOL Linheas Aéreas, Iberia, Lufthansa, Silver Airways, Singapore Airlines, TAP Portugal, Turkish Airlines and United Airlines. Its membership in Star Alliance since 2012 increased the reach of its frequent flyer program, granting the company’s clients access to more than 1,300 airports in 195 countries with 19,000 daily flights and more than 1,000 VIP lounges throughout the world, as well as mileage accruals and redemptions with Star Alliance’s 26 carrier members. In 2019, the company cancelled 19 of its international routes and nine of its domestic routes. Network and Schedules Bogotá Hub At the beginning of 2020, the company operated approximately 3,324 weekly scheduled flights through its Bogotá hub to 25 destinations in Colombia, eight in North America, 12 in South America, ten in Central America and the Caribbean, and four in Europe. As of December 31, 2020, the company operated approximately 1,453 weekly scheduled flights through its Bogotá hub to 24 destinations in Colombia, seven in North America, ten in South America, eight in Central America and the Caribbean, and three in Europe. Unlike in its international operations, the company utilizes a ‘rolling hub’ system in its domestic operations whereby its inbound and outbound connecting flights operate throughout the day, instead of during designated time banks. San Salvador Hub The company’s San Salvador hub connects, principally, passengers from different destinations in North America, Central America and South America. At the beginning of 2020, the company operated approximately 615 weekly scheduled flights through its San Salvador hub to 11 destinations in North America, five in South America and nine in Central America and the Caribbean. As of December 31, 2020, the company operated approximately 221 weekly scheduled flights through San Salvador to 11 destinations in North America, one in South America and four in Central America and the Caribbean. San José At the beginning of 2020, the company operated approximately 137 weekly scheduled flights through its network in San José to two destinations in South America and three in Central America and the Caribbean. As of December 31, 2020, the company operated approximately 31 weekly scheduled flights through its network in San José to one destination in South America and two in Central America and the Caribbean. Its San José network connects, principally, passengers from different destinations in South America and Central America. Ecuador At the beginning of 2020, the company operated approximately 365 weekly scheduled flights through its network in Ecuador to six destinations in Ecuador, three in South America and one in Central America. As of December 31, 2020, the company operated approximately 116 weekly scheduled flights through its network in Ecuador to six destinations in Ecuador and one in South America. Regional Operations in Central America At the beginning of 2020, the company operated approximately 14 weekly scheduled regional flights to two destinations in Central America through Isleña de Inversiones S.A. de C.V.—Isleña (Honduras). As of December 31, 2020, the company had no operations in that market. Point-to-Point Service In addition to the destinations served through the company’s hubs, it provides domestic and international point-to-point service between destinations in North, Central and South America, as well as Europe. Cargo and Courier Operations In addition to the company’s passenger transportation operations, it generates revenue from its cargo and courier transportation operations, primarily from the air transportation of goods, on an airport-to-airport basis, and other complementary services. In addition, the company generates cargo and courier revenues by domestic and international shipments of small parcels, on a door-to-door basis and with defined transit time commitments. Cargo The company’s cargo business operates on most of the route network of its passenger business as the company is able to use the belly capacity of its passenger fleet. In addition, the company strengthens its destination offering through 92 interline agreements with other airlines and relies on freighter-only operations. The company carries cargo for a variety of customers, including other international air carriers, freight-forwarding companies, export-oriented companies and individual consumers. The company’s cargo business is operated by both Avianca Cargo and Deprisa. The company has cargo operations in Medellín and Miami. The United States accounts for the majority of the company’s cargo traffic to and from Latin America. In Latin America, the company’s cargo operations focus on Colombia, Ecuador, Peru, Brazil, Mexico, Argentina and Chile. The company operates from/to Europe through its passenger schedule services mainly to Madrid and Barcelona, and through its freighter service to Madrid, Amsterdam and Zaragoza. The company also offers other destinations around the world through commercial agreements. Courier The company also offers domestic and international courier services under its Deprisa brand, which is widely recognized throughout Colombia. The company provides optimal logistics solutions in domestic and international delivery of documents, packages and other merchandise. Deprisa is a significant player in the courier market with 124 points of sale 59 retail establishments in Colombia, with 758 domestic destinations and 225 international destinations. Deprisa offers a wide portfolio of products and superior delivery times via air and/or ground, with premium service offering delivery next day and standard services ranging from 24 to 96 hours. Deprisa offers Avianca third-party logistics services complementary to transportation, such as storage, inventory control and global distribution of uniforms to employees. LifeMiles Loyalty Business Launched in March 2011, the company’s loyalty program LifeMiles has enhanced its brand recognition by providing superior customer service through member engagement and an outstanding miles-to-rewards ratio. The company’s LifeMiles program had enhanced loyalty to Avianca with approximately 10.1 million members as of December 31, 2020. LifeMiles’ 754 commercial partners include thousands of retail stores in core markets, such as Colombia, El Salvador, Costa Rica and Guatemala. As of December 31, 2020, the company held 89.9% ownership stake in LifeMiles. LifeMiles contributes to the strength of the company’s primary business in key commercial markets and supports yields through miles-based voluntary up-sell incentives. LifeMiles generates revenue through the commercialization of miles, many of which the company sells to banks. The company has 23 co-branded credit card partner banks, and active mileage sales agreements with approximately 100 financial institutions. Ancillary Services The company provides certain passenger ancillary services that complement its passenger and cargo business and further diversify its sources of revenue. Revenue from passenger ancillary services primarily comprises sales of LifeMiles program rewards to commercial partners and members of the program (net of the value of the underlying rewards, which when redeemed, are recognized as passenger revenue), air transport-related services (such as maintenance, crew training and other airport services provided to third party carriers through its Avianca Services division), service charges, ticket penalties, aircraft and property leases, marketing rebates, duty-free sales and charter flights. Seasonality As a consequence of the COVID-19 pandemic, the governments of Colombia and other countries in which the company operates, have temporarily suspended international and some domestic passenger operations. As a result of these measures, the company experienced a decrease in passenger income compared to previous periods. In a regular year, prior to the COVID-19 pandemic, the company’s operating results generally fluctuate from quarter to quarter due to seasonality. This fluctuation is the result of high vacation and leisure demand occurring during the northern hemisphere’s summer season in the third quarter (principally in July and August) and during holidays in the fourth quarter (principally in December) and the southern hemisphere’s summer season in January. In addition, the company’s first and second quarter results are influenced by whether Holy Week falls in March or April. Strategic Partnerships, Alliances and Commercial Agreements The company is a member of Star Alliance, a global integrated airline network and the largest and the most comprehensive airline alliance in the world. As of December 31, 2019, Star Alliance carriers served more than 1,300 airports in 195 countries with 19,000 daily flights. The company has interline agreements with approximately 80 airlines worldwide and 17 codeshare agreements to provide connections on the basis of a single ticket, paid in a single transaction and currency, usually with baggage checked through to final destinations and in some cases with boarding passes issued all the way through for all connecting flights. The company has five intermodal agreements with Renfe trains in Spain, Great Western Railway in Britain, National Express intercity buses in Britain, OEBB trains in Austria, and Deutsche Bahn coach and bus services in Germany. Sales and Distribution The company sells its products through various primary distribution channels, such as its website, mobile app, call centers, airport stations, free-standing stores, direct agents, and third parties, such as travel agents, including through their websites. Intellectual Property The company has registered the trademark Avianca with the trademark office in Colombia, as well as in other countries, including the United States. To identify the company’s Colombian courier services, it uses the DEPRISA trademark under a license agreement with the company’s Panamanian subsidiary company, International Trade Marks Agency Inc. To identify international courier services from the United States to Colombia, the company uses the Avianca Express trademark under a license agreement; and the company also has a franchise agreement by which it uses this trademark to commercialize courier services from Spain and the U.K. to some Andean countries. The company began using the Avianca Cargo trademark to identify international cargo services provided by the company’s subsidiary company, Tampa Cargo S.A.S. (Tampa Cargo) and by the different airlines of Grupo Taca Holdings Limited. The company uses the LifeMiles trademark, a registered trademark of the company’s subsidiary, LifeMiles Ltd., to identify its loyalty program. In 2019, the company registered the Avianca Express trademark in Colombia and licensed this trademark to its subsidiary, Regional Express Americas S.A.S. to identify its regional air passenger transportation services. Regulation Ecuadorian law also requires that aircraft operated by the company be registered with the Ecuadorian National Aviation Registry (Registro Aeronautico Nacional) kept by the Ecuadorian Civil Aviation Authority (Dirección General de Aviación Civil) (Ecuadorian DGAC), and that the Ecuadorian DGAC certify the air-worthiness of each aircraft in the company’s fleet. The company is subject to general environmental regulations of Colombia, such as Law 99 of 1993, as amended, and other laws, decrees and local resolutions, which regulate the management, use and exploitation of natural resources and their contamination. Each of its aircraft that flies to El Salvador is properly registered and certified with the Civil Aviation Authority of El Salvador (Autoridad de Aviación Civil) (AAC). The company’s carriers serving the United States hold all required economic route authorities from the DOT, allowing each such carrier to engage in foreign air transportation from points behind its homeland via its homeland and intermediate points to a point or points in the United States and beyond, to the full extent permitted under the ‘open skies’ bilateral air services agreement between each carrier’s homeland government and the government of the United States. The operations of the company’s carriers serving the United States are in material compliance with DOT requirements. The company’s carriers serving the United States hold operations specifications issued by the U.S. Federal Aviation Administration pursuant to 14 C.F.R. Part 129. The operations of the company’s carriers serving the United States are in material compliance with the U.S. Transportation Safety Administration requirements. The company’s carriers serving the United States are subject to other regulations promulgated by the U.S. Customs and Border Protection (CBP) within the Department of Homeland Security (DHS), as well as the Animal Plant and Health Inspection Service (APHIS) within the U.S. Department of Agriculture (DOA). The company must also comply with special noise abatement procedures required by the Madrid airport and with a tax on nitrogen oxide emissions to the atmosphere caused by commercial aviation enacted by the Catalan authority (Generalitat de Cataluña). Because the company operates fights to London, it is subject to England’s Civil Aviation Authority regulation and authorizations. Because the company operates fights to Munich, it is subject to Germany’s Civil Aviation Authority regulation and authorizations. The company is also authorized by the European Aviation Safety Agency to perform commercial and transport operations into, within or out of the E.U. territory subject to the provisions of the Union Treaty and applicable governmental authorizations. Competition Commercial Airlines Domestic Competition in Colombia In the domestic Colombian passenger market, the company competes primarily with LATAM Airlines Group (LATAM), VivaAir Group, EasyFly, Satena, and Wingo. Domestic Competition in Ecuador In the domestic Ecuadorian passenger market, the company competes primarily with LATAM. International In the international passenger market, the company competes with a number of airlines (full-service and low-cost carriers), including Aeromexico, Aerolíneas Argentinas, Air Canada, Air Europa, American Airlines, Copa Airlines, Delta Air Lines, Iberia, Interjet, JetSmart, Jet Blue Airways, LATAM, GOL Linhas Aéreas Inteligentes, Sky Airline, Spirit Airlines, United Airlines, Viva Air, Volaris and Wingo. Cargo and Courier With respect to the company’s international cargo operations, its main competitor is LATAM; and other competitors include Atlas Air, Sky Lease, UPS, Cargolux, Amerijet and American Airlines. With respect to the company’s domestic Colombian cargo operations, its main competitors are domestic freighter operators, such as Aerosucre, AerCaribe, LAS, and LATAM. The company’s main competitors in the domestic Colombian courier market are Servientrega, Coordinadora, TCC, Envia, Interrapidísimo and 4/72. Deprisa also competes with FedEx, UPS and DHL in the international courier market. LifeMiles LifeMiles’ main competitors include the loyalty programs of Latin American-based Copa Airlines and LATAM; and major U.S. airlines, such as American Airlines, Delta Air Lines and United Airlines. The company competes with other key retailers, including Olímpica, La 14, D1 and Jerónimo Martins in Colombia; Falabella, InRetail and Cencosud in Peru; and Walmart in Central America. History Avianca Holdings S.A. was founded in 1919. The company was incorporated in 2009.