What does Avianca’s bankruptcy filing mean for the LifeMiles programme?
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Editor’s note: At TPG, our top priority is providing our readers with the information needed to make educated decisions about travel and rewards-earning strategy. This is not the best time to travel, domestically or internationally, as airlines have cut major parts of their route networks. But we are sharing this information to provide value for future travel once coronavirus concerns have subsided.
As the coronavirus pandemic continues to drag on, airlines that are unable to secure financial assistance from their local governments are finding themselves in increasingly tough spots. Now the spotlight is on Colombian carrier Avianca, which filed for Chapter 11 bankruptcy protection in New York on 10 May.
Avianca is the second-largest carrier in Latin America and has a strong U.S. and European route network, though it hasn’t operated a regularly scheduled commercial flight since the end of March. While Avianca plans to resume flying as the pandemic subsides, award travellers around the world are worried about how this announcement will affect Avianca’s frequent flyer programme LifeMiles.
Today we’re going to walk through the points and miles implications of Avianca’s bankruptcy filing, and why your miles are probably safe.
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The mass appeal of LifeMiles
Just a few years ago, Avianca LifeMiles was an obscure programme that only the most advanced award travellers knew anything about. More recently, Marriott Bonvoy has added Avianca as a transfer partner, making the lucrative LifeMiles award chart more accessible than ever before.
There are a lot of reasons to love LifeMiles, from the low award rates for Star Alliance premium-cabin awards to the fact that LifeMiles doesn’t pass on fuel surcharges, even for partners like Lufthansa where premium-cabin awards can get notoriously expensive when booked with other frequent flyer programmes like Aeroplan. LifeMiles also offers discounts on mixed-cabin awards, meaning that flying first class from the U.S. to Tokyo with an economy connection on to another destination like Okinawa (OKA) will price out cheaper than just the nonstop flight to Tokyo.
That’s to say nothing of the fact that Avianca already offers the cheapest one-way premium-cabin awards between the U.S. and Asia, charging 90,000 miles for a first-class award when United MileagePlus and Aeroplan (Air Canada) both charge over 100,000 miles. For all these reasons, LifeMiles has become one of my favourite programmes to use and accounts for about 50% of all my redemptions over the last year.
What Avianca’s bankruptcy means for LifeMiles
While frequent flyer programmes started as small divisions within the airlines they served, they’ve grown massively in recent years. There are a number of airlines that make more money from their loyalty programmes and credit card partnerships than from actually flying planes, and for that reason, many frequent flyer programmes are now run as separate business entities.
This is the way Avianca is structured, with LifeMiles operating as a separate company from the main airline. Importantly, LifeMiles is not a part of Avianca’s Chapter 11 bankruptcy filing. This means that LifeMiles currently has enough capital to meet all of its obligations, and Avianca has doubled down on its commitment to the LifeMiles programme even as it enters bankruptcy proceedings. All LifeMiles elite members have had their status extended through January 2022, and members can continue to earn and redeem LifeMiles while Avianca restructures.
The biggest question mark here is what will happen to Avianca long term. If the airline is able to successfully restructure and emerge from bankruptcy protection, there won’t be any long-term effect on the LifeMiles programme. If, however, Avianca goes out of business or is forced by creditors to liquidate, that could spell trouble for LifeMiles. While customers wouldn’t lose their mileage balances in this case, they could lose the ability to redeem them for Star Alliance award flights as LifeMiles can only access that space through Avianca.
You may still be able to redeem miles for merchandise, car rentals, hotels and more, though the programme would lose a lot of value. Given LifeMiles’ close relationship with financial institutions all over Latin America and globally, it’s possible that the programme could live on even without an airline partnership in a worst-case scenario.
While a Chapter 11 bankruptcy filing is a signal that things are bad, this action also gives companies more time and assistance to sort out their debt and chart a stable path forward. It’s important to understand that LifeMiles is a separate company from Avianca, and is not affected by this bankruptcy filing.
Members can continue to earn and redeem their LifeMiles as usual, and as long as Avianca is able to emerge from bankruptcy protection successfully there should be no long-term impact on the programme.
Featured photo by Fabrizio Gandolfo/SOPA Images/LightRocket via Getty Images.
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