As filed with the Securities and Exchange Commission on April 30, 2015May 1, 2017

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

OR

For the fiscal year ended December 31, 20142016

OR

OR

Commission File Number 001-36142

AVIANCA HOLDINGS S.A.

(Exact name of registrant as specified in its charter)

Avianca Holdings S.A.

(Translation of registrant’s name into English)

Republic of Panama

(Jurisdiction of incorporation or organization)

Aquilino de la Guardia Calle No. 8, IGRA Building P.O., Panama City,

Republic of Panama

(+507) 205-600205-6000

(Address of principal executive offices)

Andrés Felipe Ruiz VesgaLuca Pfeifer

Tel: (57+1) - 587 77 00 ext. 7575•● Fax: (57+1) - 423 55 00 ext. 2544/2474

Address: Avenida calle 26 # 59 – 15 P5, Bogotá, Colombia

(Name, telephone, e-mail and/or facsimile number and address of company contact person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2014:2016:

Common Shares — 660,800,003

Preferred Shares — 336,187,285340,507,917

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨Yes�� ☐    No  x☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ¨☐    No  x☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x☒    No  ¨☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  ¨☐    No  ¨☐ (note: not required of registrant)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.filer, or an emerging growth company. See definitionthe definitions of “large accelerated filer,” “accelerated filer,” and large accelerated filer”“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.    Item 17  ¨☐    Item 18  ¨☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨☐    No  x☒

TABLE OF CONTENTS

i

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

In this annual report, we use the terms “we,” “us,” “our,” “the Company” and “Avianca Holdings” to refer to Avianca Holdings S.A., together with its subsidiaries, except where the context requires otherwise.

IFRS Financial Statements

On December 11, 2012, our board of directors approved our adoption of International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. We used a transition date of January 1, 2011, and therefore our consolidated financial statements as of and for the year ended December 31, 2012 were our first annual audited consolidated financial statements required to be prepared in accordance with IFRS. We have not prepared any financial information in accordance with IFRS as of or for any prior periods. For periods prior to 2012, we prepared our audited consolidated financial statements solely in accordance with Colombian GAAP.

Our consolidated financial statements prepared in accordance with IFRS are stated in U.S. dollars. This annual report includes our audited consolidated financial statements as of December 31, 20142015 and 20132016 and for the years ended December 31, 2012, 20132014, 2015 and 2014,2016, together with the notes thereto, prepared in accordance with IFRS. Unless otherwise indicated, all financial information provided in this annual report has been prepared in accordance with IFRS.

Non-IFRS Financial Measures

This annual report includes certain references to non-IFRS measures such as our Adjusted EBITDAR and Adjusted EBITDAR margin. See “Item 3. Key Information—Part A. Selected Financial Data” for a discussion of our use of Adjusted EBITDAR in this annual report, including the reasons why we believe this information is useful to management and to investors, and a reconciliation of Adjusted EBITDAR to net profit. These supplemental financial measures are not prepared in accordance with IFRS. Accordingly, you are cautioned not to place undue reliance on this information and should note that Adjusted EBITDAR and Adjusted EBITDAR margin, as calculated by us, may differ materially from similarly titled measures reported by other companies, including our competitors.

Adjusted EBITDAR is commonly used in the airline industry to view operating results before depreciation, amortization and aircraft operating lease charges, as these costs can vary significantly among airlines due to differences in the way airlines finance their aircraft and other assets. However, Adjusted EBITDAR should not be considered as an alternative measure to operating profit, as an indicator of operating performance, as an alternative to operating cash flows or as a measure of our liquidity. Adjusted EBITDAR as calculated by us and as presented in this annual report may differ materially from similarly titled measures reported by other companies due to differences in the way these measures are calculated. Adjusted EBITDAR has important limitations as an analytical tool and should not be considered in isolation from, or as a substitute for an analysis of, our operating results as reported under IFRS. Some of the limitations are:

ii

Currency Presentation

In this annual report, references to “dollars,” “U.S. dollars”dollars,” “US$” and “$” are to the currency of the United States and references to “Colombian pesos,” “Pesos” and “COP” are to the currency of Colombia. The meaning of the word “billion” in the Spanish language is different from that in American English. In the Spanish language, as used in Colombia, a “billion” is a million millions, which means the number of 1,000,000,000,000, while in American English a “billion” is a thousand millions, which means 1,000,000,000. In this annual report, the meaning of billion is as used in American English.

ii

We have converted certain U.S. dollar amounts presented in this annual report from Colombian peso amounts solely for the convenience of the reader. We make no representation that the peso or dollar amounts shown in this annual report could have been or could be converted into U.S. dollars or Colombian pesos at the rates shown in this annual report or at any other rate. The Federal Reserve Bank of New York does not report a noon buying rate for Colombian pesos. The conversion of amounts expressed in Colombian pesos as of a specified date at the then prevailing exchange rate may result in presentation of U.S. dollar amounts that differ from U.S. dollar amounts that would have been obtained by converting Colombian pesos as of another specified date.

The rates set forth in this annual report for conversion of COP into U.S. dollars are the rates published by the Colombian Central Bank (Banco de la República, or the Central Bank) as reported by the Colombian Financial Superintendency (Superintendencia Financiera de Colombia, or the SFC).

On March 31, 2015,2017, the exchange rate between the Colombian peso and the U.S. dollar certified by the SFC was COP 2,576.05COP2880.24 per US$1.00. See “Item 10. Additional Information—Part D. Exchange Controls—Exchange Rates.”

IFRS does not currently require us to adjust our financial statements for inflation. Colombia experienced inflation rates of 2.4%3.7%, 1.9%6.8% and 3.7%5.8% for the years ended December 31, 2012, 20132014, 2015 and 2014,2016, respectively, according to the Colombian National Administrative Department of Statistics (Departamento Administrativo Nacional de Estadística), or DANE.

Rounding

Certain figures included in this annual report have been rounded for ease of presentation. Percentage figures included in this annual report have not in all cases been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, certain percentage amounts in this annual report may vary from those obtained by performing the same calculations using the figures in our consolidated financial statements. Certain other amounts that appear in this annual report may not sum due to rounding.

MARKET DATA

This annual report contains certain statistical data regarding our airline routes and our competitive position and market share in, and the market size of, the Latin American air transportation market. This information has been derived from a variety of sources, including the Civil Aviation Authority of Colombia (Unidad Administrativa Especial de Aeronáutica Civil), the Civil Aviation Authority of El Salvador (Autoridad de Aviación Civil), the Civil Aviation Authority of Costa Rica (Dirección General de Aviación Civil), the Civil Aviation Authority of Peru (Dirección General de Aviación Civil), the Civil Aviation Authority of Ecuador (Dirección General de Aviación Civil), the International Air Transport Association, or IATA, the Latin American and Caribbean Air Transport Association, or ALTA, and other third-party sources, governmental agencies or industry or general publications.

iii

Information for which no source is cited has been prepared by us on the basis of our knowledge of Latin American airline markets and other information available to us. The methodologies and terminologies used by different sources are not always consistent, and data from different sources are not readily comparable. In addition, sources other than us use methodologies that are not identical to ours and may produce results that differ from our own estimates. Although we have not independently verified the information contained herein concerning competitive positions, market shares, market sizes, market growth or other similar data that is based upon third-party sources or industry or general publications, we consider these sources and publications to be generally reliable.

CERTAIN TERMS

This annual report contains terms relating to operating performance that are commonly used in the airline industry and are defined as follows:

“Aircraft utilization” represents the average number of block hours operated per day per aircraft for an aircraft fleet.

“Available seat kilometers,” or ASKs, represents aircraft seating capacity multiplied by the number of kilometers the seats are flown.

“Available ton kilometers,” or ATKs, represents cargo ton capacity multiplied by the number of kilometers the cargo is flown.

“Block hours” refers to the elapsed time between an aircraft leaving an airport gate and arriving at an airport gate.

iii

“CASK excluding fuel” represents operating expenses other than fuel divided by available seat kilometers (ASKs).

“Code share alliance” refers to our code share agreements with other airlines with whom we have business arrangements to share the same flight. A seat can be purchased on one airline but is actually operated by a cooperating airline under a different flight number or code. The term “code” refers to the identifier used in flight schedules, generally the two-character IATA airline designator code and flight number. Code share alliances allow greater access to cities through a given airline’s network without having to offer extra flights, and makes connections simpler by allowing single bookings across multiple planes.

“Cost per available seat kilometer,” or CASK, represents operating expenses divided by available seat kilometers (ASKs).

“Load factor” represents the percentage of aircraft seating capacity that is actually utilized and is calculated by dividing revenue passenger kilometers by available seat kilometers (ASKs). unless stated otherwise.

“Operating revenue per available seat kilometer,” or RASK, represents operating revenue divided by available seat kilometers (ASKs).

“Revenue passenger kilometers,” or RPKs, represent the number of kilometers flown by revenue passengers.

“Revenue passengers” represents the total number of paying passengers (which do not include passengers redeemingLifeMiles (previously known asAviancaPlus orDistancia) frequent flyer miles or other travel awards) flown on all flight segments (with each connecting segment being considered a separate flight segment).

“Revenue ton kilometers,” or RTKs, represents the total cargo tonnage uplifted multiplied by the number of kilometers the cargo is flown.

iv

“Technical dispatch reliability” represents the percentage of scheduled flights that are not delayed at departure more than 15 minutes or cancelled, in each case due to technical problems.

“Yield” represents the average amount one passenger pays to fly one kilometer, or passenger revenue divided by revenue passenger kilometers (RPKs). unless stated otherwise.

FORWARD LOOKING STATEMENTS

This annual report includes forward-looking statements, principally under the captions “Item 4. Information on the Company—Business Overview,” “Item 3. Key Information—Part D. Risk Factors,” and “Item 5. Operating and Financial Review and Prospects.” We have based these forward-looking statements largely on our current beliefs, expectations and projections about future events and financial trends affecting our business. Many important factors, in addition to those discussed elsewhere in this annual report, could cause our actual results to differ substantially from those anticipated in our forward-looking statements, including, among other things:

iv

The words “believe,” “may,” “should,” “aim,” “estimate,” “continue,” “anticipate,” “intend,” “will,” “expect” and similar words are intended to identify forward-looking statements. Forward-looking statements include

v

information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, the effects of future regulation and the effects of competition. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly or to revise any forward-looking statements after we distribute this annual report because of new information, future events or other factors. In light of the risks and uncertainties described above, the future events and circumstances discussed in this annual report might not occur or come into existence and forward-looking statements are thus not guarantees of future performance. Considering these limitations, you should not place undue reliance on forward-looking statements contained in this annual report.

vvi

PART I

Not applicable.

Not applicable.

The following tables present selected summary consolidated financial and operating data as of the dates and for the periods indicated. We prepare consolidated financial statements in accordance with IFRS as issued by the IASB in U.S. dollars. You should read this information in conjunction with our consolidated financial statements together with the notes thereto included in this annual report, “Presentation“Presentation of Financial and Other Information”Information” and “Item“Item 5. Operating and Financial Review and Prospects.”

The selected consolidated financial information as of January 1, 2011 (the date of our transition to IFRS) and December 31, 2011, 2012, 2013, 2014, 2015 and 20142016 and for the years ended December 31, 2011, 2012, 2013, 2014, 2015 and 20142016 has been derived from our audited consolidated financial statements prepared in accordance with IFRS.

On December 11, 2012, our board of directors approved our adoption of IFRS. We used a transition date of January 1, 2011, and therefore our consolidated financial statements as of and for the year ended December 31, 2012 were our first annual audited consolidated financial statements required to be prepared in accordance with IFRS. We have not prepared any financial information in accordance with IFRS as of or for any prior periods. For periods prior to 2012,2011, we prepared our audited consolidated financial statements solely in accordance with Colombian GAAP.

(4)

Adjusted EBITDAR represents our consolidated net profit for the year plus the sum of income tax expense, depreciation, amortization, and impairment and aircraft rentals, minus interest expense, minus interest income, minus derivative instruments, minus foreign exchange. Adjusted EBITDAR is presented as supplemental information, because we believe it is a useful indicator of our operating performance and is useful in comparing our operating performance with other companies in the airline industry. However, Adjusted EBITDAR should not be considered in isolation, as a substitute for net profit determined in accordance with IFRS or as a measure of a company’s profitability. In addition, our calculation of Adjusted EBITDAR may not be comparable to other companies’ similarly titled measures. The following table presents a reconciliation of our net profit to Adjusted EBITDAR for the specified periods:

Not applicable.

C.	Reasons for the Offer and Use of Proceeds

Not applicable.

An investment in the American Depositary Shares, or ADSs, involves a high degree of risk. You should carefully consider the risks described below before making an investment decision. Our business, financial condition and results of operations could be materially and adversely affected by any of these risks. The trading price of the ADSs could decline due to any of these risks, and you may lose all or part of your investment. The risks described below are those known to us that we currently believe may materially affect us.

Risks Relating to Our Company

Our recent growth and profitability may not be sustainable.In the fiscal year ended December 31, 2016, we experienced a decrease in revenues.

SinceIn the fiscal year ended December 31, 2016, we experienced a decrease in revenues, primarily the result of lower yields, which were caused by increased competition, new competitors and the depreciation of the Colombian peso against the U.S. dollar (which caused the dollar-equivalent amount of our February 1, 2010 combination of Aerovírevenues earned in Colombian pesos to decrease). These factors acted as del Continente Americano S.A. Avianca or Avianca,headwinds to our business, more than offsetting growth in our capacity and Grupo Taca Holdings Limited, or Taca, we have grown our operations and have been profitable. Sincetraffic. There is no assurance that date, we have benefited from favorable external circumstances that maythese factors will not continue including, among others, growth in the overall market for air travel in Latin America and favorable political and economic conditions in Colombia, Peru and much of Central America.to negatively affect our business. Prospective investors should understand that our future results of operations are subject to significant uncertainties, and that our past results (and improvements in market share) may not be indicative of our future performance.uncertainties.

We seek to continue to grow by expanding our service to new markets and by increasing the frequency of our flights to some of the markets we currently serve. For example, we plan to begin operating a new route between Bogotá and Los Angeles in July 2015 and to expand our Bogotá – London route into a daily flight in July 2015. We cannot assure you, however, that any such future growth will improve our overall profitability and may, in fact, damage our profitability. When we commence a new route, our load factors tend to be lower than those onin our established routes, and our advertising and other promotional costs tend to be higher, which may result in initial losses that would have a negative impact on our consolidated results of operations as well as require a substantial amount of cash to fund. We also periodically offer special promotional fares, particularly in connection with the opening of new routes. Promotional fares may have the effect of increasing load factors while reducing our yield on such routes during the period that they are in effect.

During 2016, Latin America presented a slight recovery after facing a challenging scenario due to the fall of commodity prices, especially fuel, which had collateral effects in the economies of the region, such as a downturn in economic growth rates, a significant currency devaluation, an increase in inflation and a decline of international investments, affecting the demand for air travel and overall performance in our home markets. The high dependency of these economies on commodities have weakened their performance. Although commodity prices recovered partially during the last year, which is reflected in the modest increase in the GDP forecast of each country as reported by The International Monetary Fund, we cannot assure you that this trend will continue.

Also, the capacity increase and low fare strategy of North American airlines in our core markets, led by low cost carriers aided by the decline of fuel prices, may continue to affect our and other Latin American airlines revenues.

In 2017, we intend to expand our network by opening routes to new destinations and we may have a moderate growth in capacity. Our growth and profitability depend on the number of markets we serve and our flight frequencies, which in turn depend on our ability to identify the appropriate geographic markets upon which to focus and to gain suitable airport access and route approval in these markets. According to ALTA, air travel in Latin America grew at rates of 13.5%5.8%, 5.4%, 8.2%, 6.9%5.8% and 5.1%3.8% in 2010, 2011, 2012, 20132014, 2015 and 2014,2016, respectively. We cannot giveassure you any assurance that this growth will continue in the future or that any new markets we enter will provide passenger traffic that is sufficient to make our operations in those new markets profitable. Any condition that would prevent or delay our access to key airports or routes, including limitations on the ability to carry more passengers, the imposition of flight capacity restrictions, the inability to secure additional route rights under bilateral agreements or the inability to maintain our existing slots and obtain additional slots, could constrain the expansion of our operations. For example, due to difficulties in repatriating funds from Venezuela, in 2014, we significantly reduced our service to Venezuela. See “Item 3. Key Information—Part D. Risk Factors—“—Risks Relating to Colombia, Peru, Venezuela, Central America and Other Countries in which We Operate—We have significant local currency cash balances in Venezuela, which we may be unable to repatriate or exchange into U.S. dollars or any other currency.operate.” There are other variables that are also affecting the Latin American airline industry and that may affect our performance. For example, the International Monetary Fund recently forecasted moderate GDP growth for emerging markets due to the decline in oil and commodity prices as well currency depreciation. In light of thesethe factors mentioned above, we cannot assure you that we will be able to successfully maintainachieve profitability establish new markets or expand our existing markets, and our failure to do so could harm our business and results of operations, as well as the value of the ADSs.

We may not be able to achieve all the anticipated benefits of the combination of Avianca and Taca.

We became the parent company of Aerovías del Continente Americano S.A. Avianca, or Avianca, and Grupo Taca Holdings Limited, or Taca, in February 2010 in connection with the combination of Avianca and Taca, two large and complex airlines that had previously operated as competitors. The success of the combination of Avianca and Taca depends in large part on our ability to achieve anticipated synergies from the streamlining of operations and personnel, increased economies of scale, new product and service offerings and organic growth. We have successfully implemented the initial phase of our integration, which consisted of the commercial integration of our fleets, networks and certain revenue management practices,practices; however, we still face challenges in implementing the second phase of operational integration, which focuses on achieving improved operating efficiencies from synergies and economies of scale. There is a risk that we may not be able to complete this integration in a manner that achieves the revenue synergies, cost savings and growth opportunities in the time, manner or amounts that we seek, if at all.

Challenges we face in the ongoing integration process include, among others, the following:

In addition, the integration process itself presents significant management challenges and is time consuming and disruptive, as it requires coordination of geographically diverse organizations. As a result, the integration process may divert our management’s attention from the day-to-day operation of our core businesses. Any such diversion could adversely affect our ability to maintain good relations with our customers, suppliers, employees, regulators and other constituencies or otherwise adversely affect our businesses, financial condition, results of operations and or business prospects.

In order to achieve the anticipated benefits of the combination of Avianca and Taca, the operations of both companies will need to continue to be reorganized, and their resources will need to be combined in a timely and efficient manner. We cannot assure you that we will be able to do so as anticipated. If we fail to implement the integration effectively and within the time frame currently contemplated, or if for any other reason the anticipated cost savings and growth opportunities fail to materialize, our business, financial condition, results of operation and business prospects could be materially and adversely affected.

If our new aircraft are not delivered or placed into service on time, our competitive position and results of operations are likely to be harmed.

We have entered into several agreements to acquire up to 50137 Airbus A320 family, five Boeing B787 and 11 Boeing for deliveryone Airbus A300F to be delivered between 2017 and 2025. On April 30, 2015, and 2019, and, in connection with our fleet modernization plan,the Company signed a new A320 family Memorandum of Understanding (“MOU”) in December 2014,Purchase Contract for a total of 100 new engine option (“neo”) aircrafts,A320 New Engine Option (NEO) family aircraft to be delivered between 2019 and 2024. As a result, Avianca and Taca are jointly and severally liable for all of the commitments and obligations set forth in the Purchase Contract, under which we expectshall make pre-delivery payments to enter intoAirbus at predetermined dates. In line with our initiatives directed towards enhancing profitability, achieving a definitive purchase agreementleaner capital structure and reducing the current levels of debt, in April 2016, we negotiated with Airbus a significant reduction of our scheduled aircraft deliveries for 2017, 2018 and 2019 and certain changes to the second quartertype of 2015.aircraft (both upgrades and downgrades), but did not alter the total deliveries scheduled between 2017 and 2025. As a result, we have a different schedule for advanced payments and aircraft acquisition. The timely delivery of these new aircraft by Airbus and Boeing is

subject to a number of uncertainties including (i) the fact that Airbus or Boeing may be unable or unwilling to fulfill their contractual delivery obligations as a result of production capacity constraints or otherwise, (ii) the aircraft delivered to us may encounter unexpected safety or other operational problems and could be grounded, as has happened in the past to B787 aircraft operated by other airlines and (iii) our inability to obtain necessary aircraft financing for any reason.

Even if our new aircraft are delivered on time, certain additional risks may delay our ability to put them into service immediately, including:

These and other such risks may significantly delay our ability to implement the critically important continuing modernization of our passenger and cargo fleet. While our jet passenger operative fleet had an average age of 5.5approximately 6.1 years as of December 31, 2014,2016, our total operative fleet had an average age (including both passenger and cargo and jet and turboprop aircraft) of approximately 6.46.7 years. Our ability to remain competitive and to achieve improvements in operating efficiencies is heavily dependent on the prompt modernization of our fleet, and any disruptions of, or delays in, our proposed modernization program may significantly harm our business by eroding our competitive position, delaying our ability to reduce operating costs and complicating our ability to retire our older aircraft on schedule.

Underperformance of aircraft ordered from Airbus Boeing and ATRBoeing may adversely impact our operations and financial results.

We expect our fleet renewal plan to result in increased fuel efficiency, crew productivity, and lower training costs leading to higher operational efficiency and flexibility. However, if the aircraft do not perform as expected, their introduction may not result in the aforementioned benefits, and additional cost will be incurred associated with their purchase and with the replacement of older aircrafts. Although our agreements with Airbus, Boeing and ATR would permit us to receive compensation under certain circumstances in the event these aircraft fail to meet their agreed specifications, we can offer no assurance that compensation received, if any, would adequately compensate us for the loss of the anticipated benefits of the new aircraft.aircraft; however, we do track the guarantees with our manufactures and manage the claims, if any. As a result, in 2016 we received compensation for a fuel performance claim against Boeing for $2.4 million. The incurrence of the additional financing costs to purchase these aircraft and the additional cost of retiring portions of our current fleet without achieving the related increase in efficiency and cost reductions could have a negative impact on our business, operations and financial performance.

Integration of new aircraft and return of old aircraft into our fleet may be costly in terms of financial and human resources.

We currently expect to integrate approximately 62143 new aircraft into our fleet between 20152017 and 20192025 and may exercise purchase rights for additional new aircraft. We may experience difficulties in integrating these new aircraft into our fleet. In addition, we face risks in integrating new types of aircraft into our existing infrastructure

and operations, including, among other things, the additional costs, resources, space, personnel and time needed to hire and train new pilots, technicians and other skilled support personnel. We may also face significant difficulties selling the aircraft we own in a short period of time at favorable prices and returning our leased aircraft and engines on reasonable terms due to rigorous pre-return inspections by the lessors, which can lead to lengthy and costly negotiations during which we are obliged to continue making lease payments for unutilized equipment. Our failure to integrate these newly purchased aircraft into our fleet as planned might require us to seek extensions of the terms for some leased aircraft. Such unanticipated extensions may require us to operate existing aircraft beyond the point at which it is economically optimal to retire them, resulting in increased maintenance costs. If new aircraft orders are not filled on a timely basis, we could face higher monthly rental rates. We also have a large inventory of spare parts and components for our current fleet and we may not be able to sell this inventory at favorable prices.

We may not be able to obtain the capital we need to finance our growth and modernization strategy.

We seek to implement our growth and modernization strategy by providing new service and increased frequencies to markets where we believe demand for air travel exceeds availability of flights, replacing our existing fleet with a new fleet and expanding our cargo activities, among other capital-intensive initiatives. The majority of our aircraft are subject to favorable long-term operating leases or are financed on favorable terms. We may be unable to obtain similarly favorable financing for our new fleet. We intend to rely upon internally-generated cash from our operations and additional debt financing in the domestic and international capital markets to fund our growth and modernization strategy. There can be no assurance, however, that we will be able to generate sufficient cash flow from operations or obtain sufficient funds from external sources with favorable financing terms. Failure to generate sufficient cash flow or to obtain such financing could result in us paying higher financing rates or being unable to accept delivery of the new aircraft, which may result in defaults under our aircraft purchase contracts with Airbus, Boeing and ATR or in the delay or abandonment of some or all of our planned expenditures, which, in turn, could adversely affect our competitive position and our business, financial condition, results of operations, cash flows and prospects.

We have significant indebtedness and financing costs and expect to incur additional indebtedness and financing costs as we modernize our fleet and seek to grow our business.

We have substantial and increasing fixed financial costs in connection with our aircraft financing obligations. As of December 31, 2014,2016, we had $3,170.6$3,274.2 million of total debt outstanding. Our interest expense was $134.0$172.6 million in 2014.2016. For the year ended December 31, 2014,2016, our aircraft rental expense under aircraft operating leases aggregated $299.2$314.5 million, and our facility rental costs aggregated more than $36.7$29.2 million. In addition, we have entered into agreements to acquire up to 50137 Airbus 11A320 family, one Airbus A300F and five Boeing B787 to be delivered between 2017 and one ATR aircraft2025. On April 30, 2015, the Company signed a Purchase Contract for delivery between 2015 and 2019. We have also entered into an MOU whereby we expect to enter into a purchase agreement to acquiretotal of 100 A320 neos for deliveryNew Engine Option (NEO) family aircraft to be delivered between 2019 and 2024,2024. In line with our initiatives directed towards enhancing profitability, achieving a leaner capital structure and reducing the current levels of debt, in April 2016, we negotiated with Airbus a significant reduction of our scheduled aircraft deliveries for 2017, 2018 and 2019 and certain changes to the type of aircraft (both upgrades and downgrades), but did not alter the total deliveries scheduled between 2017 and 2025. As a result, we have a different schedule for advanced payments and aircraft acquisition. Avianca and Taca are jointly and severally liable for all of the commitments and obligations set forth in the Purchase Contract, under which will require significant additional financing costs.we shall make pre-delivery payments to Airbus at predetermined dates. See “Item 5. Operating and Financial Review and Prospects—Part F. Contractual Obligations” for information on the magnitude of such financial commitments.

A high level of leverage may have significant negative effects on our future operations, including:

If we are unable to generate sufficient cash flow from operations to service our debt, we may be required to refinance all or a portion of our existing debt or obtain additional financing. We cannot assure you that any such refinancing would be possible or that any additional financing could be obtained. Our inability to obtain such refinancing or financing may have a material adverse effect on our business, financial condition and results of operations.

We have experienced ratings downgrades in the past.

Major rating agencies, including Fitch Ratings revised its outlook forand Standard and Poor’s, have downgraded us from “stable”in the past, suggesting the likelihood that we will be able to “negative.”repay our existing debt obligations has diminished, and may do so again in the future. If we were to experience a ratings downgrade, this change in outlook eventually results in a downgrade of our credit rating,would likely make it may become more difficult for us to obtain financing.refinance our debt and may increase our interest expenses, which could damage our financial condition and results of operations. A default on any of our debt obligations would likely have a negative impact on the market value of the ADSs.

We have significant off-balance sheet arrangements.

We have significant off-balance sheet arrangements, which must be taken in to account in evaluating our overall level of leverage and financial health. As of December 31, 2014,2016, the balance of our aircraft off-balance sheet arrangements was $1,089.6$989.4 million, primarily related to obligations under our operating leases for aircraft in our fleet. See “Item 5. Operating and Financial Review and Prospects—Part E. Off-Balance Sheet Arrangements.” The amount of these off-balance sheet arrangements may grow in the future as we incorporate new aircraft into our fleet under our fleet modernization plan, many of which could be through operating leases.

Our existing debt and lease financing arrangements contain restrictive covenants and events of default that impose significant operating and financial restrictions on us.

Several of our financing arrangements and several aircraft leases contain a number of covenants and restrictions including limits on our ability and our subsidiaries’ ability to incur additional debt and make certain investments. Some of these covenants require that we comply with specified financial ratios and other financial and operating tests. Our access to certain borrowings under our financing arrangements is conditioned upon our maintenance ofcompliance with minimum debt service coverage, and capitalization ratios, cash levels and a maximum leverage ratio. See “Item 5. Operating and Financial Review and Prospects—Part B. Liquidity and Capital Resources—Debt and Other Financing Agreements.”

Complying with these covenants may cause us to take actions that make it more difficult to execute our business strategy successfully and we may face competition from companies not subject to such restrictions. Moreover, our failure to comply withwhile a breach in these covenants could resulthas no consequences in an eventterms of default or refusal by our creditors to renew certainacceleration of our loans.

debt, it would impose restrictions on additional indebtedness that Avianca S.A. can incur outside of fleet financing and ground support equipment. We have in the past and may in the future fall out of compliance with financial covenants in our debt agreements. Currently, we are not in compliance with some of the financial covenants in our debt agreements. Although we have obtained waivers for these incidences of non-compliance currently and in the past, we cannot give you any assurance that we will be able to obtain waivers for any future failures to meet financial covenants, or that our lenders will not declare defaults or accelerate the repayment of our debt as a result of such failures.

We recently began preparing our financial statements in accordance with IFRS and, as a result, our available financial data is limited.

As of December 11, 2012, our board of directors approved the adoption of IFRS. We used a transition date of January 1, 2011, and as a result our consolidated financial statements as of and for the year ended December 31, 2012 were our first annual audited consolidated financial statements required to be prepared in accordance with IFRS. We have not prepared any financial information in accordance with IFRS for any prior periods. This makes it more difficult for you to compare our consolidated results of operations for prior years to our results of operations for the more recent years and to discern trends that would otherwise be more apparent if we were to present financial information in accordance with IFRS for years prior to 2012. The lack of financial information from which to draw comparisons of our financial data may make it difficult for you to gain a full and accurate understanding of trends affecting our results of operations, financial condition and business prospects.

Our maintenance costs will increase as our fleet ages.

Because the average age of our operative fleet was approximately 6.46.7 years as of December 31, 2014,2016, our fleet requires less maintenance now than it will in the future. As of December 31, 2014,2016, our jet passenger operative fleet had an average age of 5.5approximately 6.1 years, our cargo fleet had an average age of 16.8approximately 19.6 years and our turboprop operative fleet had an average age of 6.3approximately 4.7 years. Our maintenance costs can be expected to increase significantly, both on an absolute basis and as a percentage of our operating expenses, if our fleet ages and such fleet is not replaced or the warranties covering such fleet expire and are not renewed.

We depend on strategic alliances or commercial relationships, such as our membership in Star Alliance, in many of the countries in which we operate and our business may suffer if any of our strategic alliances or commercial relationships terminate.

In many of the jurisdictions in which we operate, we have found it in our interest to maintain a number of alliances and other commercial relationships. We depend on these alliances and/or commercial relationships to enhance our network and, in some cases, to offer our customers alternative services that we could not otherwise offer. If any of our strategic alliances and commercial relationships, in particular with Star Alliance or its members, deteriorates, or any of these agreements are terminated, our business, financial condition and results of operations could be negatively affected.

We depend on a limited number of suppliers for our aircraft and engines.

One of the elements of our business strategy is to save costs by operating a simplified fleet. AtAs of December 31, 2014, 1362016, of the 193187 aircraft that comprised our total fleet (including ninethree aircraft we lease or sublease to an entity indirectly controlled by José Efromovich, OceanAir, which conducts business under the trade name Avianca Brazil, two to Aerolitoral S.A. de CV and threeone inactive aircraft) 133 were Airbus. Our jet fleet also includes 12 Embraer aircraft, and we have also entered into agreements to acquire up to 15 Boeing 787B787-8 Dreamliners to implement our long-haul strategy. As of December 31, 2014, four B7872016, ten Boeing 787-8 have been received. We also completely replaced our regional turboprop fleet of Fokker 50s and are still in the process of replacing the ATR42s with 14 new ATR72s delivered between 2014 and 2015. As a result, we are vulnerable to significant problems associated with the Airbus, Embraer, Boeing or ATR aircraft or the engines that power them, including design defects, mechanical problems, contractual performance by the manufacturers or adverse perception by the public that would result in customer avoidance or in actions by the FAA or other regulators resulting in a reduced ability to operate our aircraft.

If any of Airbus, Embraer, Boeing or ATR or the manufacturers of the engines that power them were unable to perform their contractual obligations, or if we are unable to acquire or lease new aircraft or engines from aircraft or engine manufacturers or lessors on acceptable terms, we would have to find another supplier for a similar type of aircraft or engine. If we have to lease or purchase aircraft from another supplier, we could lose the benefits we derive from our current fleet composition. We cannot assure you that any replacement aircraft would have the same operating advantages as the Airbus, Embraer, Boeing or the ATR aircraft that currently comprise our fleet that would be replaced or that we could lease or purchase engines that would be as reliable and efficient as the engines that currently power them. We may also incur substantial transition costs, including costs associated with retraining our employees, replacing our manuals and adapting our facilities. Our operations could also be harmed by the failure or inability of Airbus, Embraer, Boeing or ATR or the manufacturers of our engines to provide sufficient parts or related support services on a timely basis.

Our business would be significantly harmed if a design defect or mechanical problem with any of the types of aircraft that we operate were discovered that would ground any of our aircraft while the defect or problem was corrected, assuming it could be corrected at all. The use of our aircraft could be suspended or restricted by regulatory authorities in the event of any actual or perceived mechanical or design problems. Our business would also be significantly harmed if the public began to avoid flying with us due to an adverse perception of the types of aircraft that we operate stemming from safety concerns or other problems, whether real or perceived, or in the event of an accident involving those types of aircraft. Carriers that operate a more diversified fleet are better positioned than we are to manage such events.

We are dependentOur operational growth depends on the airport infrastructure in our hubhubs at Bogotá’s El Dorado International Airport, Lima’s Jorge Chavez International Airport and Puente Aéreo.El Salvador’s International Airport Monseñor Oscar Arnulfo Romero y Galdámez.

Our business is heavily dependent on our operations at our Bogotá hub consisting of El Dorado International Airport andPuente Aéreo.reo. During 2014,2016, approximately 76%77% of our domestic flights and approximately 31%32% of our total international flights either departed from or arrived at our Bogotá hub. As a result, any significant interruption or disruption in service at El Dorado International Airport, or any other condition adversely affecting the international competitiveness of the Bogotá hub, could have a serious impact on our business, financial condition and operating results.

The hub-and-spoke structure of many of our operations is particularly dependent on the on-time arrival of tightly coordinated groupings of flights to ensure that passengers can make timely connections to continuing flights. Like other airlines, we are subject to delays caused by factors beyond our control, including air traffic congestion at airports, adverse weather conditions and increased security measures. El Dorado International Airport currently faces significant traffic congestion due to aircraft-flow management problems.the lack of capacity in flight and ground operations. IATA is currently providingtracking progress of the advisory services given to the Colombian Civil Aviation Authority to improve overall runway capacity and ground movement patterns at El Dorado International Airport, but wewhich are expected to be implemented throughout 2017. We cannot give any assurance that IATA’s solutions will in fact be implemented as planned, or that, if implemented, they will be successful in alleviating the current congestion.

If the expansion of El Dorado International Airport is not carried out timely, this will likely constrain significantly our ability to grow and adversely affect our ability to maintain the competitiveness of our business model. Delays inconvenience passengers, reduce aircraft utilization and increase costs, all of which negatively affect our profitability. During periods of fog, rain, storms or other adverse weather conditions, flights may be cancelled or significantly delayed. Cancellations or delays due to weather conditions, traffic control problems and breaches in security could harm our operating results and financial condition. In addition, the number of gates at El Dorado International Airport need to be increased to accommodate demand, which currently exceeds the airport’s capacity.

The accelerated operational growth of El Dorado International Airport during the last years has allowed us a better use of the actual capacity. As a consequence, IATA changed the level of slot coordination for Bogotá from one to three starting on October 25, 2015. This classification is given to airports such as John F. Kennedy (New York), Narita, Changi, Charles-de-Gaulle, Frankfurt, Madrid Barajas and Mexico City international airports, among others, that meet the following conditions contained in IATA’s Worldwide Slot Guidelines:

In June of 2014, we moved some of our domestic operations fromPuente Aéreo domestic terminal to El Dorado International Airport in order to improve connectivity between our international and domestic flights. We implemented a second phase on October 26, 2014, and now operate 56%55% of our daily domestic flights from El Dorado International Airport. Although the new airport benefits our customer experience, a new operation scheme may also present challenges in coordination, planning and costs.

Recently, the Colombian government announced the The expansion plan of the El Dorado International Airport due to lack of space inannounced by the actual facilities and the increasing growth of passenger demand in the country. In the next two years, the airport capacity will increase by 48%, with an anticipated capacity of 40 million passengers. The expansion projectColombian government seeks to increase the terminal capacity and size, improve its infrastructure, its process and customer service and its benefit operations.operations by 2018. At the end of 2015, the new control tower infrastructure was finalized and operational tests began. The new control center began to operate on April 1, 2016, using significant technology improvements. This expansion plan also includes: increase of operations per hour, implementation of new and more efficient navaids and flight procedures, high speed taxi ways, runway extensions, an addition of 27 new gates (for a total of 54 at the airport), more space for passenger terminals (such as areas related to customer service, new commercial and food court areas) and new VIP lounges. We may experience difficulties in our operations during this expansion process and we cannot assure that the expansion will be successful or be completed within the expected time frame.

Lima’s Jorge Chaves Airport is one of our three hubs, where we operate daily more than 69 national and international flights. One of the major operational risks we face on a daily basis in this airport is the limited number of parking positions. Additionally, the indoors infrastructure of the airport limits our ability to manage connections and launch new flights due to the lack of gates and increasing security and immigration controls.

Lima Airport Partners (LAP), the concessionaire of Lima’s airport, plans to expand the airport’s capacity with a second runway, more parking positions and a new terminal for passengers. However, these expansion plans were postponed for 2017 due to new decisions from the Peruvian government. IATA began to provide advisory services to the Peruvian Civil Aviation Authority to improve overall runway capacity and ground movement patterns at Jorge Chaves Airport. Therefore, we expect that for the next few years, Lima’s airport’s capacity will remain as it is today, limiting our ability to grow and affecting our competitiveness in the country and in the region.

Furthermore, we operate more than 89 daily international flights at El Salvador International Airport. Our operational growth in this region depends on the airport’s infrastructure. Due to the growth in the number of flights in each of the banks, the operation in remote parking positions has increased, the gates capacity is more limited and the equipment for the security controls to special destinations are not enough to attend our passengers. These events could limit our ability to manage connections and operations according to our standards.

We are in the process of incorporating new information technology systems, the phase-in of which may have a negative impact on our general ledger systems and other related IT systems we use to process our accounting transactions.

We are in the process of incorporating new information technology systems, the phase-in of which may have a negative impact on our general ledger systems and other related IT systems we use to process our accounting transactions. We are in the process of incorporating new information technology systems to improve our maintenance and flight operations and integrate our legacy Avianca and Taca systems. Although we seek to implement our new flight operations systems during 2015 and 2016,2017, we cannot assure you we will be able to do so. Our incorporation of these new systems is intended to help us increase revenue, reduce costs, enhance customer satisfaction and increase operating efficiencies,efficiencies; however, these new systems may not deliver the benefits we seek. In addition, in the short term, the phase-in of these new systems may result in lower service and operating performance, which could adversely affect how our customers perceive us. Also, in transitioning to new systems, we may lose data or experience interruptions in service, which could harm our business.

Additionally, in July 2014, we implemented a new Enterprise Resource Planning (ERP) system to handle business, human resources and financial processes, as well as a new a MRO software solution (Aircraft Maintenance) and encountered several challenges during such implementation. In particular, we identified a material weakness in our internal controls over financial reporting with respect to our ITGCs. We did not implement and maintain effective ITGCs over our general ledger systems and other related IT systems we use to process our accounting transactions. Although our management has initiated steps to remediate this issue and we believe the planned process improvements will adequately remediate the material weakness described above and will strengthen our internal controls over financial reporting, these steps may prove unsuccessful and we may be unable to effectively implement ITGCs that restrict access to our applications and data to appropriate internal personnel. This and any further issues with the implementation of our ERP system may increase our costs and affect our results of operations.

We face significant challenges which may limit our ability to grow our cargo business.