avianca presentation to prospective dip lenders
TRANSCRIPT
AviancaPresentation to Prospective DIP Lenders
Augus t 13 , 2020
2
Disclaimer
This document consolidates information from Avianca Holdings S.A. (the “Company”) and its subsidiaries, including unaudited financial figures, operational managerial
indicators, financial indicators and managerial projections of future performance, in line with the Company’s and its subsidiaries’ current business plans. References to
future results are indicative and do not constitute a guarantee of performance by the Company, its stakeholders, management or directors. Unaudited accounting and
financial information and projections presented in this document (including, without limitation, estimated figures for fiscal year 2020) are based on internal data and
calculations made by the Company, which may be subject to changes or adjustments and may differ from actual results under IFRS. Any change in the current economic
conditions, the aviation industry, fuel prices, international markets and external events, as well as the eventual chapter 11 plan within the meaning of Section 1125 of the
Bankruptcy Code, among others, may affect the Company’s results and future projections.
Certain statements in this presentation, including statements regarding the potential impacts of the COVID-19 pandemic and steps we plan to take in response thereto,
are forward-looking and thus reflect our current expectations and estimates with respect to certain current and future events and anticipated financial and operating
performance. Such forward-looking statements are and will be subject to many risks and uncertainties relating to our operations and business environment that may
cause actual results to differ materially from any future results expressed or implied in such forward-looking statements. Words such as “expects,” “projects,” “will,”
“plans,” “anticipates,” “indicates,” “remains,” “believes,” “estimates,” “forecast,” “guidance,” “outlook,” “goals,” “targets” and similar expressions are intended to identify
forward-looking statements. Additionally, forward-looking statements include statements that do not relate solely to historical facts, such as statements which identify
uncertainties or trends, discuss the possible future effects of current known trends or uncertainties, or which indicate that the future effects of known trends or
uncertainties cannot be predicted, guaranteed or assured, especially in light of the ongoing COVID-19 pandemic and the resulting grounding of most of our fleet. All
forward-looking statements in this presentation are based upon information available to us on the date of this presentation. We undertake no obligation to publicly update
or revise any forward-looking statement, estimate or projection, whether as a result of new information, future events, changed circumstances or otherwise, except as
required by applicable law.
The Company and its subsidiaries warn investors and potential investors that future projections are not a guarantee of performance and that actual results may differ
materially. Every investor or potential investor will be responsible for investment decisions taken or not taken as a result of his or her assessment of the information
contained herein.
This information (the “Transaction Information”) does not contain all of the information material to an investment in Avianca and the restructuring transactions described
herein (the “Restructuring”), and does not constitute an offer or a solicitation of acceptances of a chapter 11 plan within the meaning of Section 1125 of the Bankruptcy
Code or otherwise. Any such offer or solicitation will be made in compliance with any applicable securities, bankruptcy, and other applicable laws.
The Restructuring remains subject to approval of, among others, Avianca’s Board of Directors and eventually the relevant United States Bankruptcy Court. Recipient
should review the Transaction Information with its counsel as it evaluates participation in the Restructuring. Nothing contained herein shall be an admission of fact or
liability or deemed binding on any of the Company or its subsidiaries.
Avianca requires new financial support to successfully reorganize during the COVID-19 crisis
Executive Summary | Need for Financial Support
❑ Avianca executed a broad and successful voluntary restructuring program in 2019, and was on a path towards sustainable profitability. However, the COVID-19 pandemic has had a profound impact on the demand for air travel, resulting in a previously unforeseeable decline in the company’s financial results and liquidity
❑ Following the onset of the pandemic in early March, all of Avianca’s home countries imposed travel restrictions and flight bans, leading to a complete suspension of the Company’s scheduled passenger flight activity that largely persists to this day
❑ In light of recent developments, the Company initiated a restructuring under Chapter 11 of the U.S. bankruptcy code, allowing for an orderly court-supervised process to reorganize the business while adjudicating claims of creditors, lessors, OEMs and vendors
❑ The Company believes it will require fresh liquidity, under debtor-in-possession financing (“DIP Financing”) issued in two tranches subject to different terms and conditions, of approximately US$1.2bn. Total DIP financing, including roll-ups of existing debt and acquisition financing (~US$800M) negotiated in order to provide all DIP lenders with a robust collateral package, is estimated at ~US$2.0bn
❑ The proposed DIP Financing is expected to allow Avianca to weather the COVID-19 crisis with the necessary liquidity and flexibility to execute a restructuring plan that will position the Company to emerge as a successful, stable, viable and healthy carrier for the long term
3(1) From June 1, the Company has been permitted to operate a limited domestic schedule in Ecuador
US$ 1,289M
Tranche A
US$ 700M
Tranche B
54.9%Roll-up
(US$ 384M)
45.1%New Monies(US$ 316M)
69.8% New Monies(US$ 900M)
30.2% Roll-up(US$ 389M)
Tranche A Tranche B
Two-tranche DIP financing structure facilitated support from key existing stakeholders and release of additional collateral
Executive Summary | DIP Financing Structure
4
Key Considerations
❑ Tranche A: US$ 1,289M
▪ US$ 900M of new money (including at least US$200M of fresh liquidity from the 2023 Noteholders) and ~US$ 389M of roll-up debt and acquisition financing1
‒ US$168.5M issued to Advent for its remaining stake in LifeMiles (in addition to cash consideration of US$26.5M)1,2
‒ US$220M roll-up of existing debt owed to 2023 Noteholders1
▪ The Company’s settlement with the 2023 Noteholders, and deal to purchase the remaining minority stake in LifeMiles, significantly augment the collateral package securing the DIP lenders1,2
❑ Tranche B: US$ 700M
▪ ~US$ 316M in new money and ~US$ 384M rollup of existing Stakeholder Facility1,3
▪ Finalized negotiations with the Stakeholder Lenders to roll-up their outstanding debt facilities, enabling a release of collateral previously pledged to Stakeholder Facility, further augmenting the collateral package securing the DIP lenders1,3
(1) All roll-ups and acquisitions are subject to final documentation and approval by the Bankruptcy Court
(2) Pending the Company’s closing of the transaction to acquire 19.9% of LifeMiles from Advent International along with a call option to purchase the remaining 10.1% stake in LifeMiles that will still be held by Advent International
(3) Stakeholder Facility refers to the secured convertible debt issued by Avianca in December 2019 and January 2020; Stakeholder Lenders refers to the participants in the Stakeholder Facility
Proposed DIP Financing (US$ M)
Tranche A
New Money
Tranche A
Roll-Up
Tranche A
Total
Tranche B
New Money
Tranche B
Roll-Up
Tranche B
Total
DIP
Total
Total
New Money
Total
Roll-Up
Final Order (Sept
2020):
574 389 963 62 384 446 1,409 636 773
Dec 2020: 130 - 130 102 - 102 232 232 -
Feb 2021: 98 - 98 76 - 76 174 174 -
Apr 2021: 98 - 98 76 - 76 174 174 -
Total: 900 389 1,289 316 384 700 1,989 1,216 773
Negotiated three transactions to establish the collateral package securing the Tranche A and Tranche B DIP Financings
Executive Summary | Collateral Enhancement
5(1) All roll-ups and acquisitions are subject to final documentation and approval by the Bankruptcy Court
Settlement with 2023 Noteholders1
Purchase of Advent’s Stake in LifeMiles1
❑ Negotiated with the ad hoc group of 2023 Noteholders (“AHG”) to reach a settlement that provides a roll-up of US$ 220M into Tranche A of the DIP facility in exchange for at least US$ 200M of new money commitments to Tranche A and the ability to pledge the Noteholder collateral on a senior priming basis
❑ Improves DIP collateral coverage and security diversification
❑ Secures support from key stakeholders on the path to reorganization
❑ Repurchase of Advent’s 19.9% stake in LifeMiles for US$ 168.5M of DIP A consideration and US$ 26.5M of cash (with an option to acquire the remaining 10.1%) improves Avianca’s future profitability by further aligning the program with Avianca, and eliminating future dividend payments to minority shareholder
❑ Enhances DIP collateral package by unlocking significant equity value and augments Avianca’s available cash balance
❑ Seller financing feature (by further increasing the Tranche A DIP sizing) is an attractive aspect of the transaction proposal
2
3
Agreement with Stakeholders1
❑ To free up collateral, the Company negotiated a transaction with the Stakeholder Lenders to participate in the US$ 700M Tranche B that converts to equity (at the Company’s discretion) in exchange for a release of significant collateral to support the entire DIP
❑ As part of the agreement, a majority of the Stakeholder Lenders have agreed to convert their pro-rata outstanding amounts of the Stakeholder Facility into the subordinated DIP facility tranche as well as provide fresh liquidity alongside other third-party lenders to fill-out the total Tranche B, raising $316M.
1
963 963 963 1,093 1,093 1,191 1,191 1,289 1,289
446 451 457564 571 654 662 746 755
-
1,000
2,000
3,000
4,000
Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21
Collateral Coverage Tranche B Debt Tranche A Debt
The Company’s estimated cash balance and unencumbered assets are expected to provide substantial security to the Tranche A DIP
lenders throughout the restructuring effort
Executive Summary | Collateral Coverage
❑ Entirety of the proposed DIP financing is projected to be fully covered throughout the pendency of the bankruptcy case via a superpriority claim on the Company’s available cash balance and the following assets:
▪ A first-lien pledge on certain COP-denominated credit card receivables which currently secure the US$ 384M Stakeholder Convertible Facility issued by Avianca in 20196
▪ Avianca’s 89.9% equity interest in the LifeMiles loyalty program, as well as its option to acquire an additional 10.1%1,6
▪ Bond collateral2,6 that was previously pledged to the 2023 Notes, including:
‒ Avianca’s branding and trademarks
‒ Certain freighter aircraft and propulsion assets, including two (2) 767Fs, three (3) A300Fs and twelve (12) CF6 engines
‒ Residual interest in certain aircraft
6
(1) Pending the Company’s closing of the transaction to acquire 19.9% out of the 30% equity interest currently held by Advent International in the LifeMiles business (with the option to acquire the remaining 10.1% held by Advent International at the Company’s discretion)
(2) Bond collateral transferred via settlement of the US$ 484M May 2023 publicly-traded notes with the consenting Noteholders; no formal appraisal has yet been obtained for the collateral pledged on a senior secured priming basis. Estimate provided by Company’s advisors.
(3) Collateral coverage projections include monthly estimates of cash and receivables balances
(4) Assumes midpoint of range for all intangible and tangible collateral / available cash balance (ex. restricted cash), except for cash projections and COP credit card receivables balance
(5) Projected DIP balances as shown include accrued interest
(6) All roll-ups and acquisitions are subject to final documentation and approval by the Bankruptcy Court
Estimated DIP Coverage 215% 212% 205% 184% 180% 170% 166% 158% 156%
Estimated Tranche A and Tranche B DIP Balance and Collateral Coverage3,4,5,6 (US$ M)
❑ From the outset of the crisis Avianca has acted quickly to preserve cash
▪ Suspended debt and lease payments in late March and halted passenger airline operations
▪ Prepared fleet for storage and deferred significant maintenance events until flying recommences
▪ Significantly reduced payroll expenses with employee support
▪ Avianca’s cargo business, which operates 11 freighters, continues to contribute positive cashflow
❑ With these measures in place, Avianca’s cash position has remained relatively constant since filing
❑ The Company is negotiating with its aircraft financiers (and has reached interim agreement with most) to convert all of its aircraft financings into variable pay-for-usage leases in which the
Company’s aircraft lease payments would be a direct function of the amount of flying that was conducted in a given month
❑ The Company is also working to implement a variable cost structure with certain labor group parties, to ensure that the Company has the flexibility it needs to adapt its cost structure to an uncertain
resumption of service over the next 24 months and beyond
❑ As a result of these efforts, the Company currently projects that flight operations will be cash flow positive from April 2021 forward, despite capacity levels being trimmed to 30% of pre-COVID levels
Executive Summary | Roadmap to Recovery
Avianca has taken swift action to position the Company for successful recovery from the pandemic
7
“Variabilization” of Costs Provides Flexibility if Recovery is Delayed
Revised Long-Term Business Plan Provides Roadmap for Return
❑ Shortly after the pandemic began and its passenger flights ceased, the Company launched a detailed bottoms-up planning exercise to estimate the potential long-term impact of the pandemic
and to design network and fleet options to optimize the Company’s results
❑ The Company believes that its forecast assumes a conservative view of demand recovery that both (a) reduces the Company’s estimated steady-state capacity level (to approximately 70% of
pre-COVID forecast levels), and (b) extends the ramp-up time assumed to reach the steady-state level (to approximately 24 months)
❑ At July 31 the Company estimated its total consolidated cash balance at US$ 352M, with US$ 243M at the filing entities
❑ For 3Q-2020, the Company estimates its cash burn run-rate at approximately US$ 25M per month, giving it more than 2 years of estimated liquidity runway following the first drawdown of the
proposed DIP loan in September
Significant Liquidity Runway Provides Time for Recovery to Emerge
(1) LifeMiles cash is roughly US$ 100M of which US$ 40-50M is typically available to be dividended up to the parent at
any time
(2) While most of the Company’s subsidiaries filed for bankruptcy protection (the “Filing Entities”), there are several that
did not – most notably the LifeMiles subsidiary, which maintains a significant cash balance
(3) Estimates from management financial reports
Cash Balance (before DIP financing)
US$ M (approximate) May 10 June 30 July 31(E)3
Avianca Holdings1 350 369 352
Filing Entities2 225 256 243
Proposed Loan Structure
Background
Avianca Business Plan
Restructuring
Appendix
Agenda
8
1
2
5
3
4
(1) All statistics and metrics are pre-COVID-19
(2) Adjusted figures as of Dec 31, 2019
Avianca | Leading Airline in Latin America Serving More Than 28 Countries Worldwide1
9
❑ Network of routes with strategically located hubs in Colombia, Ecuador and El
Salvador serving more than 75 locations
❑ Full-service airline in Latin America with 10 operating certificates as of 2019
(albeit one or more of those AOCs have been or may be dropped in 2020)
❑ Leading carrier throughout Latin America, serving 9.9+ million loyalty members
❑ World’s oldest continuously operating airline: 100 years old on 5 December 2019
❑ >20,000 employees across the entire holding company
Key Attributes
FY2019 Performance Summary
Cargo AirlineLoyaltyPassenger Airline
Primary Segments
- 40% market share to/from Colombia
- Cargo operation in Colombia serving
Bogota, Cali, Medellin and
Barranquilla is strategic and scalable
- Employs 1,000+ personnel
- 11 freighters and belly cargo
- World class loyalty program
- 9.9+ million members
- 600+ business partners
- Recognized as a leading loyalty
program
[Note: not a filing entity]
- Comprises 80% of the business
- 2019 fleet: 152 aircraft
- Capacity per region
- Colombia International 40%
- Colombia Domestic 15%
- Central America 13%
- Central America – US 12%
- Other South America 9%
- Peru & Ecuador 8%
❑ Revenue: US$ 4.6B
❑ CASK ex-fuel: 6.0 ¢, 4.0% year-over-year improvement (decrease)
❑ EBIT margin: 3.9%
❑ Cargo tonnage carried: 6.7% year-over-year growth
❑ LifeMiles program: 9.4% year-over-year membership growth
❑ Avianca has the
largest market share
in its home market for
both domestic (51%)
and international (49%)
passenger services
❑ Avianca carried more
than 200,000 tons of
cargo in 2019, or more
than 40% of both the
Colombia-inbound and
Colombia-outbound air
cargo markets
#1
#1
Largest Airline in Colombia; Second-Largest in Latin America
2019 Route Network
Note: Avianca Peru
was placed into
liquidation on May 10,
2020, eliminating
domestic Peru routes
from Avianca network
Passenger Airline LifeMiles Avianca Cargo
Avianca | Overview of Key Business Units
10
Avianca benefits from a strong domestic market
and its advantageous hub locations for
connecting North, Central, and South America
Avianca’s freight and cargo operations hold the
#1 market position in Colombia and #2 in Miami,
connecting Latin America with the rest of the
world
Map of Freighter Network4
Freighter
Belly
US$ 154M
US$ 347M
FY2019 Revenue of
~US$ 500M5
96127
Q2 2019 Q2 2020
The Freighter
Business is
Outperforming
Due to the
COVID-Crisis
22 17 9
0
One of the Most Awarded
Loyalty Programs across the Americas3
(US$ M)
Revenues (US$ M)
Bogota,
Colombia
San Salvador,
El Salvador
3,192Avg Flights / Week
25Cities in Colombia
22Countries
623Avg Flights / Week
13Countries
Direct flights to:
Cities in North America
Cities in South America
Cities in Mexico, Central
America and Caribbean
Destinations in Europe
6
12
12
4
Direct flights to:
Cities in North America
Cities in Mexico, Central
America and Caribbean
Cities in South America
9
11
4
LifeMiles maintains a strong position as the
largest and most recognized coalition loyalty
program in Colombia and Central America
Select Partners
Overview of San Salvador Hub2
❑ FY2019 Passenger Revenues of US$ 3.9B
❑ Modern Fleet1 (Average Age of 7 Years) Consisting of:
▪ 114 Narrowbody Aircraft
▪ 21 Widebody Aircraft
9.9+ Million Active Members
Exclusive Loyalty Program for Avianca
US$ 334M in FY19 Gross Billings
Winner of 5 Global Traveler Awards
Highlights of the Program
~700K Active Co-branded Credit Cards
600+ Active Commercial Partners
Financial and Passenger Fleet Highlights
Bogota Hub Services a Strategic Network2
(4) Includes routes flown by strategic partners; from 2014 – 2020
(5) Includes freighter and belly cargo revenue
(1) Fleet count and age as of June 30, 2020;
(2) Passenger flight operating statistics as of 2019
(3) Aggregate number of Freddie Awards and Global Traveler
awards granted
42%
23%
53%
42%
16%
31%
Mexico City
Bogota
Sao Paolo (GRU)
20%55%Santiago
Avianca | Strong Market Position in Growing Markets
11
The strong long-term growth of the Colombian economy reinforces the strength of Avianca’s domestic network; Avianca’s
commanding market share in BOG positions the airline to capitalize on this growth
GDP Growth – Home Markets of Major Network Carriers
Average Real GDP growth rate1 (%): 2009 - 2019
3.5%
2.9%
2.0%
1.2%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Colombia BrazilChile Mexico
Top 4 Latin America Hubs by Historical Flight Operations
Departures2, Jan 2020 (M)
(1) Source – International Monetary Fund
(2) Source – Diio Mi
(3) Metro area population - worldpopulationreview.com
Metro Area
Population3
21M
22M
7M
11m
Other carriers
Leading carrier
Secondary carrier
Avianca | Strong Network Across the Americas Supported by a Robust Domestic Network
12
Outbound Capacity (Jan 2020)
Domestic Network
Connectivity to
South America (Intl)
Connectivity to
Central America &
Caribbean (Int’l)
Connectivity to
North America
Low exposure to
North American and
EMEA Markets1
AM
1.41.70.6
AV LA (Chile)
1.0
LP
4.4
JJ CM
Domestic Capacity (Seats, M)
299
AM
212
AV
75
671
LA CM
Capacity to South America (Seats, 000’s)
CM
33
192
AM
220
AV
58
LA
Capacity to Cen. America & Car. (Seats, 000’s)
10% 14%25%
AMAV LA
4%
CM
% of Total Seat Capacity to US/CAN & EMEA
AV
146165
CM
193
AM LA
150
Capacity to US/CAN (Seats, 000’s)
(1) Restart of flight operations between EMEA/LatAm and NAm/LatAm will be subject to governmental and regulatory approval; Source – Diio Mi
AV AM LA CM
Avianca benefits from a strong local market, and the geographic positioning of its BOG and SAL hubs enables it to channel traffic from
North American and South American markets
JJBrasil
LPPeru
❑ Served in senior management position since 2018
❑ Prior to directorship, served as an A320 pilot for 13 years
Eduardo Mendoza – Chief Operating Officer
❑ Over 25 years of experience in the aviation industry, serving at numerous airlines
❑ Previously Chief Planning Officer at Qatar Airways and IndiGo
❑ Other leadership positions at Air New Zealand and LATAM
Michael Swiatek – Chief Planning Officer
Avianca | Robust Management Team
Avianca is led by a world class Senior Executive Team
13
❑ ~20 years of experience in Investment Banking, focused on Aviation with strong
experience in Latin America
❑ Senior roles at Credit Suisse, Deutsche Bank, and Bank of America Merrill Lynch
Adrian Neuhauser – Chief Financial Officer
❑ 20 years of experience in legal practice for the airline industry
❑ Co-Founder and former General Counsel at Azul Brazilian Airlines
❑ Senior positions in prestigious law firms focused on aviation industry
Renato Covelo – Chief People and Legal Officer
Matthew Vincett – LifeMiles Chief Executive Officer
❑ Led the integration of the loyalty businesses for Avianca and Taca Airlines
❑ Previously served as Commercial Vice President and Regional Airlines Vice
President at Taca Airlines
Michael Ruplitsch – Chief Information Officer
❑ 10+ years of aviation industry experience in numerous leadership positions
❑ Previously the Chief Information Officer at Austrian Airlines during the financial
crisis, helping to transform the company / support merger with Lufthansa Group
María Paula Duque – Chief Customer Experience Officer
❑ Prior to Avianca, she held leadership positions at numerous Colombian
telecommunications companies
❑ Served for ~3 years as Colombia’s Vice Minister of Communications
Anko van der Werff – Chief Executive Officer
❑ ~20 years of experience in airline industry
❑ Previously Chief Commercial Officer at Aeromexico
❑ Senior executive roles at Aeromexico, Qatar Airways and KLM
Silvia Mosquera – Chief Commercial Officer
❑ Significant aviation experience – has held c-suite and executive positions
❑ Previously Chief Commercial Officer at Iberia Express
❑ Senior role at Vueling Airlines and Clickair
❑ Founder and CEO of Talento & Talante
❑ Expert in labor strategy
❑ Former VP Human Resources at Bancolombia Group
Jairo Burgos de la Espriella
❑ Founding Partner and CEO at Caoba Capital
❑ Former Partner at Ernst Young in Transaction Advisory for Central America
❑ Previously VP Finance, Treasury and Strategic Development for TACA Airlines
Jose Gurdian
Avianca | Strong Corporate Governance Structure
Avianca is led by a Board of Directors with deep experience in aviation and restructuring
14
❑ Managing Director at Caoba Capital
❑ Director at multiple Latin American companies in the transport sector
❑ Previously a Director at Volaris
Rodrigo Salcedo
❑ Previous Avianca CEO during transformational period (2005-15)
❑ Former Managing Director at Rothschild Group and Deutsche Bank
❑ Colombian Ambassador to OAS and General Secretary to the President
Fabio Villegas
Richard Schifter
❑ Senior Advisor at TPG Capital – previously a partner
❑ Former partner at Arnold & Porter
❑ Former board member of American Airlines, US Airways, and Ryanair
Oscar Darío Morales
❑ Previous Partner & Board President for Deloitte in Colombia
❑ Former CEO of CARVAJAL Group
Álvaro Jaramillo
❑ Former CEO of Avianca and VP of Philadelphia National Bank
❑ President of Banco de Colombia (1994-96)
❑ Founding Partner of iQ Outsourcing (Colombia’s leading BPO)
Roberto Kriete – Chairman
❑ Chairman of Kingsland Holdings
❑ Former Director and CEO of TACA Airlines
❑ Founder and Director of Volaris
James P. Leshaw
❑ Mediator and Arbitrator at Leshaw Law
❑ Former Restructuring Partner at Greenberg Taurig LLP
❑ Over 30 years of experience as a commercial lawyer
15
❑ Avianca’s focus on growth over profitability over the past decade led to stressed financials which necessitated constant refinancing
❑ In April 2019, BRW – Avianca’s then-controlling shareholder – defaulted on its loan from United Airlines, and United exercised remedies that led to governance changes at Avianca, including enhancements to the Board of Directors and new Executive Management
❑ In mid-2019 Avianca developed a comprehensive restructuring plan – the Avianca 2021 Plan – to improve profitability and position the Company to de-lever the balance sheet over time
▪ Fleet restructuring: simplified and shrank fleet by selling all aircraft in two fleet types (E190 and A318), and restructured aircraft orderbook (delivery deferrals, cancellations, and PDP refunds)
▪ Operating Performance: developed – and began implementing – initiatives to improve revenue performance and reduce operating costs to competitive levels
▪ Balance Sheet: Re-profiled over $5B in debt, improved cash position through asset sales and sale-leasebacks, as well as by raising $375 million of new liquidity
▪ Through February of 2020, the Company was tracking ahead of profitability and liquidity goals
Avianca 2021 Plan | Overview
2010 - 2019
• Outsized fleet order
• Over-leveraged
• Decreasing margins and profitability
April – May 2019
• Technical defaults from controlling shareholder
• Deterioration in Company’s access to credit markets
June – July 2019
• New Ownership and Management team
• Initiation of Avianca 2021 Plan
• Fleet right-sizing
• Balance sheet restructuring
Avianca’s successful out-of-court restructuring process in 2019 addressed shareholder defaults and an unprofitable
business model
150
179
31.2
2013
52.6
2018
Excess capacity growth…
Passenger Aircraft Capacity (ASK, B)
4.1
6.2
2018
4.2
2013
5.9
…Driven by increasing leverage…
Leverage Ratio1 Adjusted Debt (US$ B) 2
113212
232 | (4.7%)
385 | (8.4%)
2013 2018
….Led to stressed financials
(1) Leverage ratio reflects year-end adjusted net debt (total balance sheet debt + 7x annual rental expense less cash and cash equivalents) divided by LTM EBITDAR
(2) Adjusted debt includes total balance sheet debt + 7x annual rental expense (as an estimate of capitalized aircraft lease obligations)
EBIT (US$ M) | Margin % Interest (US$ M)
16
Avianca 2021 Plan | Substantial Achievements and Foundation for Continued Improvement
Margin Performance
>10.0%
Leverage Reductions
≤4x
Net Adjusted Debt to EBITDAR
EBIT Margin
Eliminate unprofitable
routes and flights
Redesign network and
strengthen BOG hub
Modify fleet to optimize new
network
Continue to improve
commercial performance
and customer service
Drive cost efficiencies
Key Financial Goals
✓ Bond Exchange, 88.1% tendered
✓ Agreement with over $5bn of creditors, lessors and ECAs on
deferral of US$220M of payments – 100% participation
✓ US$ 250M convertible note facility from current stakeholder
and US$ 125M additional facility from other investors
✓ Completed sale leaseback of 9 aircraft for US$ 160M in 1Q20
✓ Aircraft sales: 10 A318s, 4 A320s, 10 E190s → provided net cash of $100M
✓ Reduction of orders from 108 to 88 for A320neo aircraft to be delivered from 2025
✓ 25 unprofitable routes cancelled from network
✓ 6.9% capacity reduction in 4Q 2019
✓ Branded fares initiative increased pricing customization to improve revenue management
✓ 4Q-2019 on-time-performance improved 504 basic points year-over-year
✓ APEX 2020 Award for the best airline in Latin America
Successful execution of financial reprofiling with broad support from the financial markets
Significant Milestones Already Achieved in Avianca 2021 Plan
Key tenets of the Avianca 2021 Plan
remain, and additional value can be
achieved through in-court restructuring
4.8%
2018 2021 Plan
6.2x
2018 2021 Plan
17
Avianca 2021 Plan | Investor Confidence
The international bond market validated investor confidence in the Avianca 2021 Plan, with Avianca’s debt returning from
heavily discounted levels to par value upon the completion of the restructuring
Par Value of Avianca 2020 Bond During Out-Of-Court Restructuring
Source: Bloomberg as of August 9, 2020
75%
80%
85%
90%
95%
100%
105%
May-19
100
Apr-19
Jun-19
Nov-19
Jul-19
Sep-19
Aug-19
Oct-19
Dec-19
Jan-20
Feb-20
Technical default by former
ownership led to
subsequent downgrade
and change of control
Change of
management,
out-of-court
restructuring
commences
Avianca finalizes
restructuring plan and
accesses $125M in
additional financing
% of Par Value
Investor confidence restored
upon completion of Avianca’s
out-of-court restructuring
18
Var vs. Budget Var vs. LY
YTD Feb US$ M1
(Management Reporting Figures) Actual Budget LY2 $ % $ %
Total Revenue 737.4 750.3 766.1 (12.8) (1.7%) (28.7) (3.7%)
Fuel 173.8 193.6 197.1 (19.8) (10.2%) (23.3) (11.8%)
All Other Operating Expense2 532.4 534.6 576.8 (2.1) (0.4%) (44.4) (7.7%)
Total Cost 706.2 728.2 773.9 (21.9) (3.0%) (67.7) (8.7%)
EBIT 31.2 22.1 (7.8) + 9.1 41.1% + 39.1 498.0%
EBIT Margin 4.2% 2.9% (1.0%) +1.3 ppts +5.2 ppts
EBITDA 122.2 113.7 94.5 + 8.5 7.5% + 27.7 29.4%
EBITDA Margin 16.6% 15.2% 12.3% +1.4 ppts +4.3 ppts
EBITDAR 124.4 116.3 94.5 + 8.1 7.0% + 30.0 31.7%
EBITDAR Margin 16.9% 15.5% 12.3% +1.4 ppts +4.6 ppts
ASKs (millions) 8,606 8,580 9,223 + 0.3% (6.7%)
RPKs (millions) 6,926 7,085 7,551 (2.2%) (8.3%)
Passengers (millions) 4.79 4.85 5.14 (1.3%) (6.9%)
PRASK (US¢) 6.10 6.19 6.08 (1.4%) + 0.3%
Yield (US¢) 7.58 7.50 7.43 + 1.2% + 2.1%
TRASK (US¢) 8.57 8.74 8.31 (2.0%) + 3.2%
CASK3 (US¢) 8.21 8.49 8.39 (3.3%) (2.2%)
CASK3 excluding Fuel (US¢) 6.19 6.23 6.25 (0.7%) (1.1%)
More efficient cost structure yielded improved profitability in January & February 2020
Avianca 2021 Plan | Outperformance Through February 2020
RASK
8.7
7.8
9.0
8.1
January February
2019 2020
CASK2
8.2
8.6
8.1
8.4
January February(1) Figures reflect unaudited management financial reports
(2) Last year (2019), Proforma results shown are IFRS16 compliant; 2019 operating expense excludes on-time gain on interline commission settlements
(3) Operating expenses exclude gains and losses related to asset sales
Halt of Avianca 2021 Initiatives4
19
COVID-19 | Pandemic Dramatically Impacted AVH’s Business and Outlook
Substantial drop in demand coupled with global and local travel restrictions led to a temporary suspension of passenger flights
❑ A320 densification project to increase seats per aircraft
from 150 to 174
❑ Sale of 2 A330s, 2 A319s and 1 A320 aircraft
❑ Sale of 1 A330 freighter aircraft
❑ Implementation of digital initiatives
❑ Modernization improvements, fleetwide WIFI installation
Employees
❑ More than half of Avianca’s employees were
furloughed and the remaining employees
accepted voluntary pay reductions
❑ Contracts suspended for contract workers
❑ Working with financial entities to support
employees:
• Defer payment of loans through payroll
• Continued payment of health insurance
Profitability5 6
Load Factors1 Passenger no-shows Sales (US$ M) – Historical vs Projected2 3
8-Mar
Sep Nov 22-Mar
Jan
3%
15-Mar
1-Mar
68%
6% 6%
83%
Jan 22-Mar
Sep Nov 15-Mar
84%
1-Mar
8-Mar
26%
81%
86
(210)-300
-200
-100
0
100
Actual - Q2 2020B-Plan Forecast - Q2 2020
EBIT (US$ M)
200
350
150
0
50
100
250
300
5 7 1 51 3 1739 11 9 511 3 7 9 11
2018 2019 2020
(99)% sales
ARG CrisisCapacity
change
Note: Q2 2020 Actuals include forecast values for June, which are pending finalization
❑ The Company has preserved cash from the onset of the crisis
▪ Suspended debt and lease payments in late March and halted passenger airline operations
▪ Prepared fleet for storage and deferred significant maintenance events until flying recommences
▪ With strong employee support, significantly reduced payroll expenses with most employees taking voluntary furloughs and temporary wage reductions
▪ Avianca’s cargo business, which operates 11 freighters, continues to contribute positive cashflow
❑ With these measures in place, Avianca’s cash position has remained relatively constant since filing
❑ Avianca variabilized key fixed costs in order to preserve cash through the pendency of the case and position the Company for restorationof passenger demand and a successful exit from bankruptcy
▪ Payroll costs: dramatic cost reductions have been achieved through a variety of initiatives
▪ Fleet costs: now directly tied to aircraft usage
US$ M (approximate) May 10 June 30 July 31 (E)3
Avianca Holdings1350 369 352
Filing Entities2225 256 243
20
Response to Crisis | Cash Preservation Measures
Avianca acted quickly to preserve cash and has taken measures to align its cost structure to evolving market conditions
(1) LifeMiles cash is roughly US$ 100M of which US$ 40-50M is typically available to be dividended up to the parent at any time
(2) While most of the Company’s subsidiaries filed for bankruptcy protection (the “Filing Entities”), there are several that did not – most notably the
LifeMiles subsidiary, which maintains a significant cash balance
(3) Estimates from management financial reports
0.7 1.3
3-month leave
6-month leave
Contract Suspension
13.7
9-month leave
12-month leave
6.7 0.6
Early Retirement2
Total3
0.5
23.5
Response to Crisis | Human Capital Initiatives
21
Avianca instituted two programs designed to significantly reduce payroll costs and improve working capital
❑ Starting in April 2020, management – with the support of employees – achieved a dramatic temporary reduction of the workforce, decreasing payroll costs by more than 50%▪ This reduction has been achieved through a combination
of temporary measures, including short-term voluntary and involuntary furloughs as well as temporary wage reductions
49
28
18 18 19
MayMarch JulyApril June
Ongoing Payroll Reduction Program Immediate Action
2020 Monthly Payroll Cash Expense (US$ M)1
❑ Starting in June 2020, management implemented longer term measures, including long-term voluntary and involuntary furloughs, and has launched a voluntary early retirement program▪ Over 7,000 employees accepted long-term unpaid leave,
and an additional 2,720 employees had their contracts suspended
▪ 502 employees with fixed contracts accepted early retirement packages
❑ Longer term, additional headcount reduction will be achieved through the expiration of all fixed term contracts
Estimated Monthly Net Savings (US$ M)
(1) Payroll expenses (including pension) paid out in each month; includes 1M in severance payments made in July
(2) Will incur one-time severance cost of US$ 1.1M
(3) Savings include all filing entities, including Long-Term Leave Program and Suspension savings from SAI, Regions, and Deprisa
Response to Crisis | Power-by-the-Hour Payment For Aircraft Usage
22
Avianca’s fixed fleet cost has largely been converted into a variable structure
❑ Power-by-the-Hour (PBH): the Company has agreed with aircraft counterparties on a fully variable power-by-the-hour compensation structure with uniform rates for 102 aircraft
▪ Capital Cost compensation driven by Flight Hours, with rates set by aircraft type and vintage
▪ Maintenance compensation driven by Flight Hours, APU Hours, and Flight Cycles, with rates set by equipment type
▪ In negotiation for remaining 44 aircraft where counterparties have been given extended timelines
PBH Example: Total Monthly Compensation by Utilization
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
0 20050 250100 150 300
Typical Monthly Lease Rate1
PBH Capital
payment
PBH
maintenance
payment
FH/month2
(1) Typical Monthly Lease Rate based on internal Avianca data
(2) For this example, assumed 1.9 FH/FC for FC driven costs, and 3 FH/APUH for APUH driven costs
PBH rates are lower than Avianca’s pre-filing lease rates
PBH Maintenance compensation is in line with historical maintenance cost, but paid current to lessors for
adequate protection, rather than incurred by Avianca at event
Proposed Loan Structure
Background
Avianca Business Plan
Restructuring
Appendix
Agenda
23
1
2
5
3
4
24
Disclaimer
As stated above, this presentation includes unaudited financial figures, operational managerial indicators, financial indicators and
managerial projections of future performance which are forward-looking and thus reflect our current expectations and estimates with
respect to certain current and future events and anticipated financial and operating performance.
Such forward-looking statements are and will be subject to many risks and uncertainties relating to our operations and business
environment that may cause actual results to differ materially from any future results expressed or implied in such forward-looking
statements. Additionally, forward-looking statements include statements that do not relate solely to historical facts, such as statements
which identify uncertainties or trends, discuss the possible future effects of current known trends or uncertainties, or which indicate that
the future effects of known trends or uncertainties cannot be predicted, guaranteed or assured, especially in light of the ongoing COVID-
19 pandemic and the resulting grounding of most of our fleet.
References to future results are indicative and do not constitute a guarantee of compliance by the Company, its stakeholders,
management or directors. Unaudited accounting and financial information and projections presented in this document (including, without
limitation, estimated figures for fiscal year 2020) are based on internal data and calculations made by the Company, which may be subject
to changes or adjustments and may differ from actual results under IFRS. Any change in the current economic conditions, the aviation
industry, fuel prices, international markets and external events, as well as the eventual chapter 11 plan within the meaning of Section 1125
of the Bankruptcy Code, among others, may affect the Company’s results and future projections.
Business Plan | Fleet
25
Fleet Plan
Steady-State
Fleet Count
Pre-COVID
Fleet (March)
Current
Plan
Turboprop 15 6
Narrowbody 109 77
Widebody 23 11
Total Passenger 147 94
Freighters 11 11
The Company’s plan assumes a significant fleet reduction, particularly in turboprop and widebody aircraft
10 10 11 11 11 11 11 11
41 41
57 57
7277 77 77
6 6
6 6
6
6 6 6
June 2020 1Q-221Q-214Q-20 4Q-223Q-20 2Q-21 3Q-21 2Q-22 3Q-22
2 2
57 57
74
94
74
89
94 94
Fleet Ramp-Up Plan – Active & Operational Spares (Quarter end fleet count)
TP
NB
WB
(1) Figures includes passenger flights / routes only
(2) 2019 excludes one-time events expenses of US$ 605.6M
26
Business Plan | Operational Statistics and Metrics (Long-Term)
Load Factor and Average Fare (US$ per pax)
108.6102.1
95.3101.8
106.2 109.9 110.9
20222021
77.5%
2019
81.7% 84.1%
2020
85.1%82.2%
2023
84.8%
2024
84.8%
2025
Unit Costs (US₵ per ASK)Unit Revenues (US₵ per ASK)
6.1 5.7 6.1 6.1 6.4 6.6 6.6
8.5
11.010.4
9.6 9.810.1 10.2
2019 20242020 2021 2022 2023 2025
Total RASK
P-RASK
6.2
12.2
8.86.9 6.9 7.0 7.0
14.4
8.4 8.5 8.6 8.78.4
20192 2020
10.3
CASK ex-fuel
2021 20242022 2023 2025
CASK
Average Fare
Load Factor
Average Stage Length1 (km per departure)
1,2021,128
1,243
1,353 1,390 1,399 1,405
2024202220212019 2020 2023 2025
27
Business Plan | Projected Results
ASKs (billions)
20212019 (act.) 2022
53.853.3
2020
35.3
53.7 53.8
2023 2024 2025 2026
54.3
14.1
22.3
37.1 37.6 38.4 39.2
-31%
(60)
490
1,046
1,1481,224 1,261 1,299
2020 2021 2022 2023 202620252024
Adjusted EBITDAR1 (US$ M)
Total Revenue (US$ M)
4,604
1,554
2,322
3,3833,637
3,818 3,932 4,050
4,8114,529
4,677 4,808
2020 202320212019 (act.) 2022 2024 20262025
-24%
Revised Forecast Avianca 2021 PlanAvianca 2021 PlanRevised Forecast
(473)
16
422
504572 598 624
2025202420232020 2021 2022 2026
EBIT (US$ M)
(1) Adjusted EBITDAR excludes estimated maintenance payments to aircraft lessors (a proxy for capitalized maintenance event expense)
Margin: (30.3%) 0.7% 12.5% 13.9% 15.0% 15.2% 15.4%Margin: (3.9%) 21.1% 30.9% 31.6% 32.1% 32.1% 32.1%
28
Business Plan | Variable Cost Structure Helps Preserve Cash In All Operating Environments
Avianca has successfully variabilized its costs, and can continue to respond to COVID-19 operating realities with a flexible cost
structure (variable costs ~75%; semi-variable ~20%)
AVH Operating Revenue & Expense(US$ M)
406
332
194
5163
51
363343
232
130141
119
Apr-20Jan-20 May-20Feb-20 Mar-20 Jun-20
Operating Revenue
Operating Costs3
Average Adjusted Operating Expense (Jan-Feb 2020)
Other
Fuel
Pax Services
376
Air TrafficFlight Ops
Sales & Marketing
G&A
SW&B
Maintenance
Distribution & Commissions
Ground Ops
Aircraft Ownership2
Post-COVID Ch. 11 Cost Structure Flexibility
vs. Pre-COVID Adjusted Operating Expense1
(US$ M)
Semi Variable Cost
Variable Cost
Fixed Cost
(1) Adjusted operating expense includes an estimate of interest expense related to aircraft ownership
(2) Aircraft Ownership expense consists of an estimate of aircraft depreciation expense and aircraft interest expense (for both debt and IFRS-16 lease liability interest); going forward, the Company’s forecast assumes that aircraft
ownership will be replaced by a fully-variable PBH aircraft leasing structure
(3) Operating costs exclude gains and losses from asset sales
29
Business Plan | Avianca’s Transformation Aligns with Broader Trends of the LatAm Market
Airline Fleet size1 Comments
114 NB
21 WB• Hubs in Colombia, El Salvador and Ecuador
228 NB
73 WB
• Primary hubs in Chile, Brasil, Peru and Colombia
• Filed for Chapter 11 protection on 26 May 2020
98 NB
19 WB
• Hub in Mexico City
• Filed for Chapter 11 protection on 30 June 2020
95 NB• Hub in Panama City
• Joint-venture partner of Avianca and United Airlines
44 NB
10 WB
• Hub in Buenos Aires
• Requires substantial government financing in order to maintain operations
20 NB• Operates primarily in domestic Colombia and Peru
• Expanding internationally with new service to Miami and Ecuador
4 NB• Low-cost subsidiary of Copa with focus cities in Colombia
• Serves domestic Colombia, Caribbean and nearby international destinations
133 NB
10 WB
• 3rd largest carrier in Brazil (24% domestic and 5% international share in 2019)
• Low-cost structure, but scheduled as network carrier
128 NB• Largest domestic airline in Brazil (38% share); 4% international share in 2019
• Limited international service to destinations in the Americas
81 NB• 2nd largest airline in Mexico with hubs in Guadalajara, Mexico City, and Tijuana
• Serves both domestic markets and routes to the US and Central America
37 NB• Operates low cost flights from several bases in Mexico
• Serves domestic Mexico and destinations in the US and Caribbean
19 NB• 2nd largest airline in Chile serving the domestic market and select destinations
in South America (Peru, Argentina, Brazil, Uruguay, Bolivia)
17 NB• Growing low-cost carrier with bases in Chile and Argentina
• Serves markets in Chile, Argentina, Colombia, Brazil and Peru
Network
Carriers
Low-Cost
Carriers
With a reduced cost structure and de-leveraged balance sheet, Avianca will be well-positioned compared to its Latin American
network peers and growing LCC competitors
(1) Fleet count reflects active and temporarily parked aircraft as reported by airfleets.net on 1 July 2020
While the Company believes the revised business plan presents a realistic view of its prospective performance, the Company also
believes that there are significant additional opportunities that could drive substantial improvements to its future results
30
❑ Market recovery from COVID-19 is highly uncertain; however, the Company believes that it has incorporated conservative assumptions regarding the recovery,
including:
▪ Long-term demand reductions of 15% in domestic markets and 20% in international markets
▪ 2-year recovery to reach steady-state capacity, with a gradual phased re-launch of service
Faster and/or Stronger Demand Recovery from COVID-19
More Favorable Competitive Environment
Joint-Business Agreement and Expanded Network Partnerships
Further Cost Reductions or Other Initiatives
❑ The Company’s revenue forecast assumes competitive capacity reductions that are less than the assumed market demand reductions, leading to an implied
increase in competitor market share
❑ While the Company has incorporated this conservative assumption in its forecast, in reality, competitors will face significant financial challenges in order to
maintain such capacity levels in light of the assumed demand reduction
❑ The Company’s forecast does not assume any benefit from any proposed joint-business agreements or partnerships
❑ The Company believes that additional network partnerships and/or Codeshare Agreements would result in expanded connecting itineraries, improved customer
service in partner hub airports, and enhanced loyalty benefits / redemptions
❑ The Company is engaged in a continuous exercise of process improvement as it seeks to refine its cost structure and improve its competitiveness
❑ The Company has several significant efforts underway to identify further opportunities for improvement, including a potential back-office efficiency initiative and
an overall cost-base re-design to ensure that its cost structure is as competitive as possible
Business Plan | Other Opportunities
Proposed Loan Structure
Background
Avianca Business Plan
Restructuring
Appendix
Agenda
31
1
2
5
3
4
Avianca Restructuring | Objectives
32
The Chapter 11 process will accelerate progress towards the objectives of the Avianca 2021 Plan
Right-size Fleet and Reduce Complexity
Reject aircraft to optimize fleet to future
network
Reset Key Contracts to Market Terms
Assume / reject contracts, and renegotiate
terms as needed
Improve Liquidity and Reduce Leverage
Restructure company debt
Expand Profit Margins
Right-size the company’s footprint, and
establish variable cost structures
Avianca Restructuring | Assumptions
Forecast Methodology • The cash flow forecast was constructed from the Company’s latest detailed operating forecast, with granular assumptions for capital
expenditures, working capital, and specific financing cash flow assumptions to reflect the proposed balance sheet restructuring
Working Capital Adjustment • Working capital accounts are generally assumed to gradually revert over the next 12 months to levels consistent with long-term driver trends
(e.g., “days of”); the forecast assumes a write-off of approximately US$ 92M of pre-petition accounts payable as a result of the bankruptcy
filing; the forecast also includes other working capital usages of cash
Pre-delivery Deposits • Projections assume no new aircraft deliveries and company has conservatively set a reserve against PDP payments but intends to vigorous
pursue recovery of such PDP payments
Fleet Ownership • Aircraft financings (debt or lease contracts) are assumed to be rejected or abandoned through the court process (or materially adjusted in
favor of the Company); the forecast assumes monthly cash rental payments for all required aircraft at estimated market lease rates
• Aircraft rental and maintenance payments are assumed to be pro-rated based on the expected utilization of the aircraft
• Security deposits reflecting 2-months’ rent are assumed to be paid for the Company’s fleet at bankruptcy emergence
• Capital expenditures for aircraft maintenance have been removed from the cash flow forecast and replaced with an estimate of expected
monthly maintenance payments that would be due under operating leases (to compensate lessors for the post-petition allocation of heavy
maintenance event costs)
Debt • LifeMiles debt is assumed to be refinanced upon maturity in August 2022 with a one-for-one new debt issue that features the same
amortization and interest rate as the existing issue
• For all other debt that remains on the balance sheet, amortization schedules have been adjusted to assume either 5-year or 7-year
maturities with no amortization through mid-2022, and straight-line amortization from then to maturity
• Principal payments are assumed to be suspended during the court proceeding for all debt issues that remain at the Company (at the filing
entities); interest is assumed to be paid on a current basis on the assumed debt amounts outstanding
DIP Facility • A two-tranche term loan facility in an aggregate amount of US$ 1,989M drawn through a series of installments throughout the restructuring
period, expected to be converted into exit financing and equity upon emergence
Equity upon Exit • The forecast assumes the US$ 700M Tranche B DIP Facility (plus any applicable accrued interest) will convert into equity of the newly
reorganized entity
Legal and Professional Fees • The forecast includes an estimate of the legal and professional fees that would be required throughout the restructuring 33
34
Avianca Restructuring | Treatment of Operating Leases
❑ For simplicity and capital-structure neutrality, the restructuring forecast shows all aircraft as operating leases on a go-forward basis
❑ The Company’s restructuring forecast includes estimated market lease rates for each aircraft type assumed in the operating plan; however, the Company has
not estimated the lease term for the new or revised operating leases (an element that is required in order to calculate the IFRS 16 lease liability)
▪ The lease liability assumed under IFRS 16 is highly sensitive to the lease term (shorter term leases generate a lower lease liability)
▪ The Company did not want to create an artificial bias in the projected leverage ratio by assuming lease terms that may be shorter than the lease terms to be agreed
❑ Instead, the Company has elected to show the restructuring forecast using pre-IFRS 16 accounting (with rental expense and no on-balance sheet liability), as
this allows the lease obligation to be capitalized at a standard 7.0x rate in all years (this additionally allows for a more consistent comparison to historical results)
In 2019, the Company adopted a new international accounting standard (IFRS 16) that requires operating leases to be capitalized
Treatment of Operating Leases
Pre-IFRS 16 (pre-2019) IFRS 16 (2019+)
Income Statement Rental payments recorded as an expenseInstead of rental expense, lease payments are converted into depreciation
and interest expense
Balance SheetLease obligation is not included on the balance sheet (the lease liability
remains off-balance sheet)
Present value of the lease payment cash flows is capitalized as an asset
(generating depreciation expense) and an operating lease liability (which is
reduced over time as lease payments are made)
Adjustment to
Net Debt Calculation
To estimate the off-balance sheet lease obligation, net debt is adjusted to
include annual rental expense capitalized at 7.0x (industry convention)
The on-balance sheet operating lease liability is counted as debt, therefore
no adjustment is needed to the net debt calculation
While the Company’s published financial reports now reflect IFRS 16, the Company’s restructuring forecast as included herein
reflects the older pre-IFRS 16 lease accounting (which is more conservative)
Avianca Restructuring | Pro-Forma Capital Structure
Debt Issue
(all figures in US$ M except ratios)
Mar 20201
Current Debt
(Pre-IFRS 16)
Mar 20201
Current Debt
(IFRS 16 Est.)
Estimated In-Court Restructuring
Treatment
Year-End 2022
Forecast1
(Pre-IFRS 16)
Year-End 2022
Forecast
(IFRS 16 Est.)4
DIP Financing - - New debt to be issued (at exit) 1,300 1,300
Secured Aircraft Financings 2,266 2,266All debt-financed aircraft assumed to be
abandoned (and a portion leased back)- -
Capitalized Aircraft Rentals
(capitalized at 7.0x annual rent)2,069 1,223 Remaining fleet assumed to be leased 1,919 1,135
LifeMiles 397 397 Retained 239 239
Stakeholder Convertible Note 378 378Assumed consensual conversion into
equity- -
Other Debt2 1,093 1,093
Substantially reduced to allowed
secured claim amounts and restructured
into new debt
222 222
Total 6,203 5,357 3,680 2,896
Projected Leverage Ratio3,4 8.0x 6.9x 2.5x 1.8x
35
(1) The financial forecast contained herein incorporates what the Company and its advisors believe to be illustrative placeholders for the quantum of amounts that the Debtors anticipate may be paid during the pendency of the
Chapter 11 cases and at emergence (as applicable). These amounts do not reflect the legal positions the Company may adopt during the pendency of the cases nor the values they will seek to incorporate in their Plan(s) of
Reorganization. No valuation work has been performed in connection with the amounts set forth herein
(2) Includes certain letters of credit
(3) Leverage Ratios = Adjusted net debt to LTM EBITDAR
(4) For purposes of calculating an IFRS16 compliant leverage ratio, the Company assumed an average fleet-wide lease term of five (5) years discounted at a 9% cost of capital
Proposed Loan Structure
Background
Avianca Business Plan
Restructuring
Appendix
Agenda
36
1
2
5
3
4
37
Proposed Loan Structure | DIP Financing Key Assumptions
Borrower / Credit Parties Avianca Holdings S.A. and each of its subsidiaries
Commitment SizeTranche A: US$ 1,289M1
Tranche B: US$ 700M1
Tranche A Interest Rate TBD interest rate calculated monthly in arrears and to be paid at the company’s discretion in cash or in-kind
Tranche B Interest Rate 14.50% per annum, calculated monthly in arrears and to be paid at the company’s discretion in cash or in-kind
Maturity 18 months; with the option to extend 60 days
Budget / Covenants
DIP Facility shall contain covenants customary or appropriate in the context of the proposed DIP Facility, including: reports,
budgets and variance reports, projections, officers’ certificates, monthly reporting packages and other information
DIP Facility will also contain a covenant providing that the Credit Parties will obtain certain case milestones on a timetable to be
agreed
– Milestones will provide for certain case controls regarding the progress of the case toward and approved plan of
reorganization
Collateral
All obligations under the DIP Facility shall at all times be secured by:
(i) Superpriority claim status having priority over any and all other claims;
(ii) Perfected first priority lien on all cash accounts;
(iii) COP-denominated credit card receivables1;
(iv) Avianca’s trademarks1;
(v) Freighter fleet and spare engines1;
(vi) Residual interest in a portion of Avianca’s passenger aircraft fleet1; and
(vii) Liens on Operating Company equity, where permitted (principally Avianca’s 89.1% equity interest and call option for
incremental 10.1% in LifeMiles) 1
Priority Tranche B shall be subordinated to Tranche A
Tranche B Conversion to EquityEntire Tranche B facility, including capitalized interest, will automatically convert into equity of the Reorganized Debtor provided
specific conditions are met
Events of Defaults DIP Facility shall contain events of default customary or appropriate
(1) All roll-ups and acquisitions are subject to final documentation and approval by the Bankruptcy Court
COP-Denominated Credit Card Receivables2
❑ Prior to Avianca’s proposal to purchase the remaining minority stake in the loyalty program, the Company was pledging its original 70% stake of the business unit (a non-filing entity) on a first-lien basis to secure the DIP facility
❑ AVH recently negotiated a contract to acquire 19.9% out of Advent’s 30% equity stake in LifeMiles (with an option to purchase the remaining 10.1%)
❑ LifeMiles is a highly diversified, top-tier loyalty program, generating ~70% of its annual gross billings from non-Avianca customers:
▪ Credit card co-brands
▪ Financial partnerships
▪ Hotel, retail and transportation
❑ LifeMiles’ strong market position, significant runway for growth and robust cash flow generation allows the company to maintain a strong valuation on a stand-alone basis
❑ Although COVID-19 will continue to have a profound impact upon the financial and operational results, LifeMiles’ management has developed a number of strategies to emerge as a top-tier loyalty program and generate significant cash flow for Avianca
❑ Due to the settlement with the Stakeholder Lenders to roll-up the prepetition secured claims into the Tranche B DIP, certain Colombian Peso denominated credit card receivables became available to pledge against the DIP financing
▪ During initial investor outreach, the Company was only able to offer a second-lien position on the security
❑ As a result, the Company is offering a first-lien position on the credit card sales
❑ For reference, in FY 2019 the average monthly balance of Colombian Peso denominated credit card receivables was US$ 42M
Avianca’s Interest in LifeMiles1,2
Proposed Loan Structure | Key Segment of Overall Collateral Package2
Beyond the cash collateralization and other assets, the Company is pledging its interest in LifeMiles1,2 and certain COP-denominated
credit card receivables2 as a portion of the total security to further bolster the DIP facility
38
As domestic operations are forecasted to drive the majority of
global airline carriers’ revenues out of the COVID crisis, the
credit card receivables should serve as attractive collateral
An August 2020 independent valuation of LifeMiles
estimates the subsidiary’s equity stake between
US$ 1,550M and US$ 2,600M
(Valuation based on 90% equity interest plus 10% purchase option)
(1) Pending the Company’s closing of the transaction to acquire ~2/3rd (19.9%) stake Advent’s equity interest in the LifeMiles business (with the option to acquire the remaining 10.1% at the Company’s discretion)
(2) All roll-ups and acquisitions are subject to final documentation and approval by the Bankruptcy Court
Proposed Loan Structure
Background
Avianca Business Plan
Restructuring
Appendix
Agenda
39
1
2
5
3
4
LifeMiles
LifeMiles Loyalty Program | Overview
The LifeMiles loyalty program is uniquely positioned to continue to bolster its growth trajectory and profitability
9.9+ Million Active Members
~700K Active
Co-branded Credit Cards
600+ Active Commercial Partners
Exclusive Loyalty
Program for Avianca
Premier
Airlines
Auto/Gas
Apparel
Renowned
Restaurants
& Eateries
Best Hotels
Largest
Banks
US$ 334M in FY19
Gross Billings
1
2
5
3
4
6
Strongly positioned in its core markets as the largest and
most recognized loyalty program
Underpenetrated consumer markets foster
significant growth potential
Diversified network of Blue-Chip
commercial and financial partners
Attractive operating model generating
predictable, long-term liquidity
Proven, experienced and aligned management
team, supported by a top private equity sponsor
Exclusive agreement with Avianca, the leading carrier in
Colombia and Central America, extended through 2040
GLOBAL
PARTNERS
41
Key Highlights Business At-A-Glance
Winner of 5 Global
Traveler Awards
…..Is Accelerating Growth in Gross Billings
(US$ M)
LifeMiles Loyalty Program | Business Model
LifeMiles continues to augment its non-airline partner network to drive robust operational results and profitability
42
186 209246 237
7799
11097
2016 2017 2018 2019
52
81
112
133
25.6%33.1% 35.7% 39.6%
2016 2017 2018 2019
Strong EBIT Growth and Margin Expansion (IFRS 15)2
(US$ M)
EBIT Margin (%)
263
308
356
Airline Third-Party
334
A Diversified Mix of Customers & Geographies
Gross Billings by Type3
49%
22%
29%
Financial
Air
Direct to
Members &
Others
Costa Rica
6%
El Salvador
6%
Guatemala
6%
Other
15%
Colombia
43%
Peru
11%
USA
14%
Non-Airline Gross Billings by Geography3
❑ Diversified geographic presence with 6 countries contributing 6%+ of gross billings
❑ Asset-light business model with favorable working capital dynamics, cash margin of ~45%1
of gross billings
❑ Proven management team, the core of which has been in place since 2010 and has grown
non-airline sales by 4x over the same time period
❑ On average, non-air rewards provide a 10% to 20% higher profit margin than redemptions
for air tickets
❑ With a growing customer base and partner network, non-domesticated (Colombia) gross
billings have increased by 10%+ since FY2017
Successful and Diverse Business Model
(1) Defined as Adj. Cash EBITDA / Gross Billings
(2) Excludes one-time non-cash breakage-related adjustment
(3) Reflects FY 2019. LifeMiles revenue comes primarily from the sale of miles, which are referred to as “Gross Billings”
25 21
10 9 4
0
Financial Partnerships Retail / Transport Channels Geographic Diversification
LifeMiles Loyalty Program | Growth Opportunities
LifeMiles plans to leverage its diversified partnerships across an expanding geographic footprint to accelerate growth
43
Through a growing global network of co-branding opportunities and redemption channels, LifeMiles serves as a world-class loyalty platform to its
customers and commercial partners beyond that of a typical frequent flyer program
LifeMiles has more co-brand credit cards than
any of its Latin American Competitors
Co-branding contracts deliver diversified and
predictable sales streams vs. AVH point redemptions
Air miles sold through financial partnerships yield
higher margins than redemptions for air services
Co-branded credit cards facilitate continuous customer
engagement with the LifeMiles brand
Network of financial partnerships enables LifeMiles to
provide a more comprehensive loyalty program
Hotels Car Rental Retail Restaurants
Members are able to utilize their accrued points as a
liquid currency outside of the airline industry
Non-airline channels have diversified redemption
capabilities, thereby increasing platform appeal
Partnership with Uber Eats further entrenches LifeMiles
into the high-growth, food delivery business
LifeMiles’ branded e-commerce and mobile wallet offer a
compelling value proposition for members and partners
93.1%
11.0%2.8% 2.7%
0
North America CentralAmerica
South America Colombia
LifeMiles continues to augment its co-brands
across the globe1
Financial Partners in North America
have gained significant relevance
U.S. conversion of bonus miles grew 241% in 2019 vs
2018 and represent ~42% of conversion gross billings
Robust international partnerships enable global
customers to redeem rewards towards LifeMiles’ points
Expansion of geographic footprint enables the business
to appeal to a broad array of travelers
(1) YoY Growth, as of Mar ’20
2014 2015 2016 2017 2018 2019 2020Last 7
Years
Best
Redemption
Ability (last 5Y)
Member Engagement Continues to Strengthen1
2 2 3 2 1 1 1 12 5
– – – – – – – – –
– – – – – – – – –
– – – – – – – – –
– – – – – – – – –
2 3 2 4 5 3 3 22 –
2 2 1 1 1 1 1 9 –
– – – – – – – – –
– – – – – – – – –
LifeMiles Loyalty Program | Entrenched Brand Recognition
LifeMiles’ award winning brand facilitates strong member engagement across its accrual and redemption network
44
9.2%
6.9%
23.1%
9.0%
Total Members
Loyal Members Core
Active Members Core
Engaged Members Core
2
3
LifeMiles is indisputably the most awarded program in Latin America….only Southwest Rapid Rewards & American Advantage rival LifeMiles in all of
the Americas
(1) YoY Growth, as of Mar ’20
(2) Members active for two consecutive years in Core Markets
(3) Members who are active in two or more categories over the last 12-month period
LifeMiles Loyalty Program | Response to Crisis and Go-Forward Strategy
The LifeMiles business unit is largely immune from the effects of the COVID-19 pandemic due to its diversified
partnerships and global customer base
45
337
133
2019A
Revenue
EBIT
FY2019 Financial Results (US$ M)1❑ Although forecasts indicate that Covid-19 will have a profound
impact upon the financial and operational results for the
foreseeable future, LifeMiles’ management has developed a
number of strategies to effectively “weather the storm” and
emerge as top-tier loyalty program:
▪ Broaden partnerships with global banking institutions and expand co-
branded credit cards that provide higher margin business for
LifeMiles
▪ Offer additional point transfer opportunities with other Latin American
and worldwide carriers to attract a diversified membership base
▪ Augment non-airline accrual and redemption channel for members
(i.e. retail, hotel chains, restaurants, other transportation)
▪ Develop and market in-house products that offer further channels for
members to accrue / redeem points while driving brand awareness:
➢ LifeMiles Marketplace (ecommerce solution)
➢ LifeMilesPay (mobile wallet)
(1) Revenue and EBIT reflect stand-alone LifeMiles financials and include significant amounts of intercompany transactions between LifeMiles and other Avianca Holdings entities (primarily the passenger airlines)
Thank You