developments relating to our Chapter 11 proceedings and our ability to effectively implement a reorganization plan;

uncertainty regarding the terms of a reorganization plan;

conflicting interests among the multiple parties on which our restructuring efforts depend;

the sufficiency of the DIP facility to allow us to continue our operations;

our ability to successfully emerge from Chapter 11, which will be contingent upon numerous factors, including our ability to obtain new financing upon our emergence from Chapter 11, general economic, political and business conditions in our core markets of Colombia, Peru, Ecuador and Central America and the other geographic markets we serve;

developments relating to the spread of COVID-19 and government measures to address it;

our ability to develop financing structures with the governments of the key markets in which we operate;

our level of debt and other fixed obligations;obligations and our ability to meet our payment obligations and to comply with the covenants set forth in our financing agreements;

our ability to obtain financing and the terms of such financing, including our ability to refinance existing indebtedness;

any change in our controlling shareholders and any consequences of such change in control, including under our financing and other material agreements;

our ability to successfully implement our strategy, including our ability to increase operating efficiency, reduce costs and increase our operating margin;

demand for passenger and cargo air services in the markets in which we operate;

competitive pressures on pricing;

our capital expenditures;

changes in the regulatory environment in which we operate;

fluctuations of crude oil prices and its effect on fuel costs;

changes in labor costs, maintenance costs and insurance premiums;

changes in market prices, customer demand and preferences and competitive conditions;

terrorist attacks and the possibility or fear of such attacks affecting the airline industry;

threats or outbreakoutbreaks of diseases affecting traveling behavior and/or imports and/or exports;

iv

The words “believe,” “may,” “should,” “would,” “aim,” “estimate,” “continue,” “anticipate,” “intend,” “will,” “expect”“expect,” “plan” and similar words are intended to identify forward-looking statements. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, strategies for reducing costs and increasing operational efficiency, potential selected 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 of Financial and Other Information” and “Item 5. Operating and Financial Review and Prospects.”Not applicable.

The selected consolidated financial information as of December 31, 2011, 2012, 2013, 2014 and 2015 and for the years ended December 31, 2011, 2012, 2013, 2014 and 2015 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 2011, we prepared our audited consolidated financial statements solely in accordance with Colombian GAAP.

		As of December 31,
		2015				2014				2013				2012				2011
		(in US$ thousands)
Liabilities and equity
Current liabilities:
Current portion of long-term debt		$	412,884			$	458,679			$	314,165			$	282,145			$	283,520
Accounts payable			480,592				547,494				509,129				488,568				449,695
Accounts payable to related parties			9,449				13,797				7,553				7,309				13,746
Accrued expenses			118,192				138,262				134,938				181,802				119,235
Provisions for legal claims			13,386				14,157				14,984				7,903				11,060
Provisions for return conditions			52,636				61,425				33,033				7,598				10,987
Employee benefits			32,876				49,193				52,392				57,241				44,390
Air traffic liability			433,575				461,118				491,752				405,295				356,049
Other liabilities			12,691				127,496				27,432				29,470				38,333
Total current liabilities			1,566,281				1,871,621				1,585,378				1,467,331				1,327,015
Non-current liabilities:
Long-term debt			3,060,110				2,711,898				1,951,330				1,572,299				1,375,994
Accounts payable			3,599				21,167				2,735				3,041				19,596
Provisions for return conditions			109,231				70,459				56,065				59,297				57,792
Employee benefits			127,720				173,460				276,284				400,831				340,366
Deferred tax liabilities			13,475				15,760				7,940				2,528				2,134
Air traffic liability(1)			93,519				85,934				72,853				63,494				61,696
Other liabilities non-current			15,375				8,466				11,706				—				—
Total non-current liabilities			3,423,029				3,087,144				2,378,913				2,101,490				1,857,578
Total liabilities			4,989,310				4,958,765				3,964,291				3,568,821				3,184,593
Equity:
Common stock			82,600				82,600				83,225				92,675				92,675
Preferred stock			42,023				42,023				41,398				19,473				19,988
Additional paid-in capital on common stock			234,567				234,567				236,342				263,178				263,178
Additional paid-in capital on preferred stock			469,273				469,273				467,498				270,061				279,112
Retained earnings			507,132				355,671				351,102				68,153				96,167
Revaluation and other reserves			18,394				24,550				28,857				25,418				27,059
Total equity attributable to the Company			1,353,989				1,208,684				1,208,422				738,958				778,179
Non-controlling interest			18,646				8,063				6,324				13,144				12,916
Total equity			1,372,635				1,216,747				1,214,746				752,102				791,095
Total liabilities and equity		$	6,361,945			$	6,175,512			$	5,179,037			$	4,320,923			$	3,975,688

		For the Year Ended December 31,
		2015				2014				2013				2012				2011
		(in US$ thousands, except per share data)
INCOME STATEMENT DATA
Operating revenue:
Passenger		$	3,458,017			$	3,862,721			$	3,862,397			$	3,550,559			$	3,182,953
Cargo and other(2)			903,324				840,850				747,207				719,097				611,475
Total operating revenue			4,361,341				4,703,571				4,609,604				4,269,656				3,794,428
Operating expenses:
Flight operations			58,069				56,695				82,872				84,774				79,934
Aircraft fuel			1,006,792				1,345,755				1,325,763				1,305,396				1,123,547
Ground operations			412,382				397,625				343,812				321,552				279,607
Aircraft rentals			317,505				299,220				273,643				255,566				214,861
Passenger services			149,292				154,464				143,512				132,823				115,049
Maintenance and repairs			309,719				268,894				188,659				222,705				228,280
Air traffic			202,980				206,151				180,140				169,650				177,407
Sales and marketing			612,775				605,674				584,468				522,645				500,822
General, administrative and other			176,195				165,172				257,273				206,666				184,700
Salaries, wages and benefits			666,084				725,793				674,951				644,901				561,331
Depreciation, amortization, and impairment			230,732				198,660				169,580				122,080				126,507
Total operating expenses			4,142,525				4,424,103				4,224,673				3,988,758				3,592,045
Operating profit			218,816				279,468				384,931				280,898				202,383
Interest expense			(169,407	)			(133,989	)			(113,330	)			(122,112	)			(90,778	)
Interest income			19,016				17,099				11,565				25,006				33,649
Derivative instruments			626				5,924				(11,402	)			(24,042	)			(3,164	)
Foreign exchange			(177,529	)			10,272				23,517				(56,788	)			1,600
Profit (loss) before income tax			(108,478	)			178,774				295,281				102,962				143,690
Total income tax expense			(31,028	)			(50,280	)			(46,460	)			(64,705	)			(43,814	)
Net (loss) profit for the year		$	(139,506	)		$	128,494			$	248,821			$	38,257			$	99,876
Net (loss) profit attributable to equity holders of the parent			(155,388	)			129,270				257,493				35,141				98,886
Net (loss) profit attributable to non-controlling interest			15,882				(776	)			(8,672	)			3,116				990
Basic and diluted (loss) earnings per share (common and preferred)			(0.14	)			0.13				0.27				0.04				0.11
Basic and diluted (loss) earnings per ADS			(1.12	)			1.04				2.16				—				—
Common and preferred share dividends per share (COP/US$)(3)			198.5 / 0.07				160.1 / 0.07				75 / 0.04				75 / 0.04				50 / 0.03
Common shares at period end			660,800,003				660,800,003				665,800,003				741,400,000				741,400,000
Preferred shares at period end			336,187,285				336,187,285				331,187,285				155,784,429				159,907,920
Weighted average of common shares used in computing earnings per share (thousands)			660,800				665,383				728,800				741,400				761,369
Weighted average of preferred shares used in computing earnings per share (thousands)			336,187				331,604				184,854				158,081				114,939
CASH FLOW DATA
Net cash provided by operating activities		$	363,002			$	257,130			$	544,642			$	391,226			$	330,312
Net cash (used in) provided by investing activities			(330,491	)			(246,889	)			(483,259	)			(300,805	)			(371,179	)
Net cash (used in) provided by financing activities			18,079				(52,820	)			289,294				16,744				57,001
OTHER FINANCIAL DATA
Adjusted EBITDAR(4)		$	767,053			$	777,348			$	828,154			$	658,544			$	543,751
Operating margin(5)			5.0	%			5.9	%			8.4	%			6.6	%			5.3	%
Adjusted EBITDAR margin(6)			17.6	%			16.5	%			18.0	%			15.4	%			14.3	%

		For the Year Ended December 31,
		2015				2014				2013				2012				2011
OPERATING DATA (Unaudited)(7)(8)
Total passengers carried (in thousands)			28,290				26,230				24,625				23,093				20,455
Revenue passengers carried (in thousands)(9)			27,378				25,382				23,865				22,425				19,909
Revenue passenger kilometers (RPK) (in millions)(10)			35,478				32,602				31,186				29,072				26,368
Available seat kilometers (ASK) (in millions)(11)			44,513				41,052				38,762				36,545				33,136
Load factor(12)			79.7	%			79.4	%			80.5	%			79.6	%			79.6	%
Block hours(13)			547,859				517,943				483,204				466,439				429,712
Average daily aircraft utilization(14)			10.1				10.3				10.1				10.2				9.9
Average one-way passenger fare (US$)			126.3				152.2				161.8				158.0				160.0
Yield(15)			9.7				11.8				12.4				12.2				12.1
Passenger revenue per ASK (PRASK)(16)			7.8				9.4				10.0				9.7				9.6
Operating revenue per ASK (RASK)(17)			9.8				11.5				11.9				11.7				11.5
Cost per ASK (CASK)(18)			9.3				10.8				10.9				10.9				10.8
CASK excluding fuel			7.0				7.5				7.5				7.3				7.4
Revenue ton kilometers (RTK) (in millions)(19)			1,259				1,104				867				777				717
Available ton kilometers (ATK) (in millions)(20)			2,152				1,810				1,538				1,315				1,182
Gallons of fuel consumed (in thousands)			461,268				427,785				406,143				388,066				350,122
Average price of jet fuel into plane (net of hedge) (US$/gallon)			2.18				3.15				3.27				3.33				3.15
Average stage length (kilometers)(21)			1,002				972				1,025				1,056				1,063
On-time domestic performance(22)			83.5	%			71.9	%			67.4	%			66.4	%			70.1	%
On-time international performance(23)			85.7	%			80.9	%			80.4	%			79.2	%			79.3	%
Completion rate(24)			98.5	%			98.1	%			98.0	%			98.3	%			98.3	%
Technical dispatch reliability(25)			99.5	%			99.4	%			99.4	%			99.5	%			99.3	%
Departures(26)			299,192				282,475				253,967				247,365				228,056
Average daily departures			820				774				696				678				627
Airports served at period end			104				102				98				98				110
Routes served at period end			179				168				170				169				168
Direct sales as % of total sales(27)			34.1	%			33.6	%			31.0	%			33.3	%			32.1	%
Full-time employees and cooperative members at period end			21,145				20,545				19,153				18,071				17,360
Revenue per full-time employee plus cooperative members (US$)			206				229				241				236				219

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.

Not applicable.

D.	Risk Factors

An investment in the American Depositary Shares or ADSs,(“ADSs”) representing our preferred shares involves a high degree of risk. You should carefully consider the risks described below, as well as other information included in this annual report, 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 as of the date of this annual report may materially affect us.

Risks Relating to Our Company

In our most recent fiscal year,For purposes of this section, when we experiencedstate that a net loss and a decrease in revenues.

Inrisk, uncertainty or problem may, could, would or will have an “adverse effect” on us or “adversely affect” us, we mean that the fiscal year ended December 31, 2015, we experienced a net loss due to, among other factors, decreased revenue, foreign exchange losses (primarily from a significant devaluation of cash balances in Venezuela resulting from the lack of repatriations at the official exchange rates, resulting in a total loss of $236.7 million), andrisk, uncertainty or problem could have an increase in interest expense. Our decreased revenue was primarily the result of lower yields, which were caused by increased competition and the depreciation of the Colombian peso against the U.S. dollar (which caused the dollar-equivalent amount of our revenues earned in Colombian pesos to decrease). These factors acted as headwinds to our business, more than offsetting growth in our capacity and traffic. There is no assurance that these factors will not continue to negatively affect our business. Prospective investors should understand that our future results of operations are subject to significant uncertainties.

We seek 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. We cannot assure you, however, that any 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 in 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 theadverse effect of increasing load factors while reducing our yield on such routes during the period that they are in effect.

During 2015, Latin America faced 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, which is reflected in the decrease of the GDP’s forecast of each country as reported by The International Monetary Fund.

As a result of these economic conditions, in 2015 the international passenger traffic from Colombia, Ecuador and Peru suffered a downturn, especially due to the effect of currency exchange rates on the tourism sector. As a consequence, our revenue and the revenues of other airlines in the region significantly dropped last year.

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 2016, we do not intend to expand our network by opening routes to new destinations; however, 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 focusemerge from Chapter 11 proceedings and to gain suitable airport access and route approval in these markets. According to ALTA, air travel in Latin America grew at rates of 7.2%, 5.8% and 5.8% in 2013, 2014 and 2015, respectively. We cannot give 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. See “—Risks Relating to Colombia, Peru, Venezuela, Central America and Other Countries in which We Operate.” In light of the factors mentioned above, we cannot assure you that we will be able to successfully achieve profitability or expand our existing markets, and our failure to do so could harm our business and results of operations,implement a reorganization plan, 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; 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 businessoperations, cash flow, prospects, could be materially and adversely affected.reputation and/or the trading price of the ADSs, except as otherwise indicated. You should view similar expressions in this section as having similar meanings.

Risks Relating to Our Chapter 11 Proceedings

IfWe are subject to the risks and uncertainties associated with our new aircraft are not delivered or placed into service on time, our competitive position and results of operations are likely to be harmed.Chapter 11 proceedings.

We have entered into several agreements to acquire up to 141 Airbus and eight Boeing to be delivered between 2016 and 2025. On April 30, 2015, the Company signed a Purchase Contract for a total of 100 A320 New Engine Option (NEO) family aircraft to be delivered between 2019 and 2024. As a result, Aviancaconsequence of our filing Chapter 11 petitions, our operations and Taca are jointlyour ability to develop and severally liableexecute our business plan, as well as our continuation as a going concern, will be subject to the risks and uncertainties associated with bankruptcy. These risks include our ability to:

We will also be subject to risks relating to, among others:

Any delays in our Chapter 11 proceedings increase the risks 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 financingreorganize our business and emerge from bankruptcy and may increase our costs associated with the reorganization process.

Because of the many risks and uncertainties associated with a voluntary filing for any reason.

Even ifrelief under Chapter 11 and the related proceedings, we cannot accurately predict or quantify the ultimate impact that events that occur during our new aircraft are deliveredChapter 11 proceedings may have on time, certain additional risks may delayus and there is no certainty as to our ability to put them into service immediately, including:continue as a going concern.

These and other such risks may significantly delayAdditionally, 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 approximately 5.7 years as of December 31, 2015, our total operative fleet had an average age (including both passenger and cargo and jet and turboprop aircraft) of approximately 6.2 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 ATR 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; however, we do track the guarantees with our manufactures and manage the claims, if any. As a result, in 2015 we received compensation for a fuel performance claim against Boeing for $8.4 million and a claim against ATR for approximately $1.0 million for delays on a super boost certificate. 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 149 new aircraft into our fleet between 2016 and 2025 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 mightChapter 11 proceedings require us to seek extensionsexit financing to refinance our debtor-in-possession financing and fund operations. If we are unable to obtain such financing on favorable terms or at all, our chances of successfully reorganizing our business may be seriously jeopardized and the likelihood that we instead will be required to liquidate our assets may be enhanced. Furthermore, we cannot predict the ultimate amount of all settlement terms for some leased aircraft. Such unanticipated extensions may require usthe liabilities that will be subject to operate existing aircraft beyond the point at which itour plan of reorganization. Even once a plan of reorganization 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 partsapproved and components for our current fleet andimplemented, we may not be ableadversely affected by the possible reluctance of prospective lenders and other counterparties to sell this inventory at favorable prices.do business with a company that has recently emerged from Chapter 11 proceedings.

We may not be able to obtain the capital we need to finance our growth and modernization strategy.confirmation of a Chapter 11 plan of reorganization.

We seekTo emerge successfully from bankruptcy court protection as a viable entity, we must meet certain statutory requirements with respect to implement our growthadequacy of disclosure regarding a plan of reorganization, solicit and modernization strategy by providing 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 majorityobtain the requisite acceptances of our aircraft areplan, demonstrate the feasibility of our plan to the bankruptcy court by a preponderance of the evidence and fulfill other statutory conditions for confirmation of our plan, which have not occurred to date. The confirmation process can be subject to favorable long-term operating leasesnumerous unanticipated potential delays. We cannot assure you that a plan of reorganization will be approved by the bankruptcy court.

The success of any reorganization will depend on approval by the bankruptcy court and the willingness of our creditors to agree to the exchange or are financed on favorable terms.modification of their claims as will be outlined in a plan of reorganization, and there can be no guarantee of success with respect to any plan of reorganization. We may receive objections to confirmation of any plan of reorganization from various stakeholders in our Chapter 11 proceedings. We cannot predict the impact that any objection to or third party motion during our Chapter 11 proceedings may have on the bankruptcy court’s decision to confirm a plan of reorganization or our ability to complete a plan of reorganization.

If a plan of reorganization is not confirmed by the bankruptcy court, it is unclear whether we would be unableable to obtain similarly favorable financing forreorganize our new fleet. We intendbusiness and what, if any, distributions holders of claims against us, including holders of the ADSs, would ultimately receive with respect 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.their claims. There can be no assurance however,as to whether or when we will successfully reorganize and emerge from our Chapter 11 proceedings. If no plan of reorganization can be confirmed, or the bankruptcy court finds that it would be in the best interest of creditors, the bankruptcy court may convert our Chapter 11 proceedings to cases under Chapter 7 of the bankruptcy code. In such event, a Chapter 7 trustee would be appointed or elected to liquidate our assets for distribution in accordance with the priorities established by the bankruptcy code.

The pursuit of our Chapter 11 proceedings has consumed, and will continue to consume, a substantial portion of the time and attention of our management, which may adversely affect us, and we may face increased levels of employee attrition.

It is impossible to predict with certainty the amount of time that we could spend in our Chapter 11 proceedings or to assure parties in interest that a plan of reorganization will be confirmed. Our Chapter 11 proceedings may involve additional expense and our management will be required to spend a significant amount of time and effort focusing on the proceedings. This diversion of attention may adversely affect us, particularly if the Chapter 11 proceedings are protracted.

During the pendency of the Chapter 11 proceedings, our employees will face considerable distraction and uncertainty, and we may experience increased levels of employee attrition. A loss of key personnel or material erosion of employee morale could impair our ability to execute our strategy and implement operational initiatives, thereby adversely affecting us.

We have substantial liquidity needs and may not be able to obtain sufficient liquidity to confirm a plan of reorganization and exit our Chapter 11 proceedings successfully.

Although we have taken multiple measures to reduce our expenses and have reduced the scale of our operations significantly, mainly as a result of developments relating to the spread of COVID-19, our business remains capital intensive. In addition to the cash requirements necessary to fund our ongoing operations, we have incurred significant professional fees and other costs in connection with our reorganization and expect that we will continue to incur significant professional fees and costs throughout our Chapter 11 proceedings. There are no assurances that our liquidity is sufficient to allow us to satisfy our obligations related to our Chapter 11 proceedings, to proceed with the confirmation of a Chapter 11 plan of reorganization and to emerge successfully from our Chapter 11 proceedings.

We can provide no assurance that we will be able to secure additional interim financing or exit financing sufficient to meet our liquidity needs. Our liquidity, including our ability to meet our ongoing operational obligations, is dependent upon, among other things: (i) our ability to comply with the terms and conditions of the cash management order entered by the bankruptcy court in connection with our Chapter 11 proceedings, (ii) our ability to maintain adequate cash on hand, (iii) our ability to generate sufficient cash flow from operations, or obtain sufficient fundswhich depends largely on factors beyond our control relating to developments deriving from external sourcesthe spread of COVID-19, (iv) our ability to confirm and consummate a Chapter 11 plan of reorganization and (v) the cost, duration and outcome of the Chapter 11 proceedings.

Any Chapter 11 plan of reorganization that we may implement will be based in large part upon assumptions and analyses developed by us. If these assumptions and analyses prove to be incorrect, our plan may be unsuccessful in its execution.

Any plan of reorganization we may implement could affect our capital structure and operation of our business and will reflect assumptions and analyses based on our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we consider appropriate under the circumstances. Whether actual future results and developments will be consistent with favorable financing terms. Failureour expectations and assumptions depends on a number of factors, including but not limited to: (i) our ability to generate sufficient cash flow orchange substantially our capital structure, (ii) our ability to obtain suchadequate liquidity and access financing could resultsources, (iii) our ability to maintain customers’ confidence in us paying higher financing rates or being unableour viability as a going concern, (iv) our ability to accept deliveryretain key employees and (v) the overall strength and stability of general macroeconomic conditions. In light of the many uncertainties and risks deriving from developments relating to the spread of COVID-19, these factors and their effect on us are highly unpredictable.

In addition, any Chapter 11 plan of reorganization will rely upon financial projections that are necessarily speculative, and it is likely that one or more of the assumptions and estimates that are the basis of these financial forecasts will not be accurate. In our case, the forecasts will be even more speculative than normal because of the many uncertainties we face relating to macroeconomic conditions in the countries in which we operate, depressed demand for air travel and severe travel restrictions imposed by governments, all as a result of developments relating to the spread of COVID-19. Accordingly, we expect that our actual financial condition and results of operations will differ, perhaps materially, from what we have anticipated. Consequently, there can be no assurance that the results or developments contemplated by any plan of reorganization we may implement will occur or, even if they do occur, that they will have the anticipated effects on us or our business or operations. The failure of any such results or developments to materialize as anticipated could materially and adversely affect the successful execution of any plan of reorganization.

Even if a Chapter 11 plan of reorganization is consummated, we may not be able to achieve our stated goals and continue as a going concern.

Even if a Chapter 11 plan of reorganization is consummated, we will continue to face a number of risks, including further depressed demand for air travel and challenging economic conditions as a result of developments relating to the spread of COVID-19 or otherwise. Accordingly, we cannot guarantee that a Chapter 11 plan of reorganization will achieve our stated goals and permit us to effectively implement our strategy.

Furthermore, even if our debts are reduced or discharged through a plan of reorganization, we may need to raise additional funds through public or private debt or equity financing or other various means to fund our business after the completion of our Chapter 11 proceedings. Our access to additional financing is, and for the foreseeable future will likely continue to be, limited, if it is available at all. Therefore, adequate funds may not be available when needed or may not be available on favorable terms.

Our Chapter 11 proceedings may adversely affect our ability to maintain important relationships with creditors, customers, suppliers, employees and other personnel and counterparties, which could materially and adversely affect us.

Our Chapter 11 proceedings may adversely affect our commercial relationships and our ability to negotiate favorable terms with important stakeholders and counterparties. As part of our Chapter 11 proceedings, our creditors and bondholders will not receive complete recovery for their claims. Further, public perception of our continued viability may also adversely affect our relationships with customers and their loyalty to us. Strains in any of these relationships could materially and adversely affect us.

Risks Relating to Our Business

Developments relating to the outbreak of COVID-19 have already materially and adversely affected, and may further materially and adversely affect, us.

In December 2019, cases of COVID-19 were first reported in Wuhan, China, and the virus has now spread globally. The World Health Organization declared COVID-19 a pandemic and, in March 2020, governments around the world, including those of the United States, Colombia and most Latin American countries, declared states of emergency in their respective jurisdictions and implemented measures to halt the spread of the virus, including enhanced screenings, quarantine requirements and severe travel restrictions.

Following orders by the governments of Colombia and of other countries in which we operate, we have temporarily ceased international passenger operations to and from Colombia, ceased all Colombian domestic passenger flight operations and cancelled all passenger flights to and within El Salvador and Ecuador. As a result of these measures, substantially all of our passenger flights have been cancelled and our corresponding fleet has been grounded.

New waves of COVID-19 have started to emerge in certain countries in which we operate and may continue to spread, including novel and variant strains of the virus. Considering the variant strains, governmental regulations were imposed in various countries mandating new social distancing measures and other closures to pace the numbers of infected population. Further, vaccines are being distributed worldwide and a share of the world population is already immune to the virus.

The spread of COVID-19 and the government measures taken to address it have had a material and adverse effect on the airline industry and on us and have resulted in unprecedented revenue and demand drop as well as overall macroeconomic uncertainty. We cannot foresee or quantify the extent of the impact of COVID-19 on our operational and financial performance, which will depend on developments relating to the spread of the outbreak, the duration and extent of quarantine measures and travel restrictions and the impact on overall demand for air travel, all of which are highly uncertain and cannot be predicted.

Regular operations began gradually on June 15^th, 2020. For the month of December 2020, we operated 87 routes, which represented 37% of the capacity we offered during the same period of the previous year, before the COVID-19 pandemic, serving 65 destinations in 22 countries. In total, during 2020 we carried 7.8 million passengers and operated 72,000 flights.

For the months of January, February and March 2021, we operated 91, 83 and 65 routes and served 66, 63 and 53 destinations respectively, which represented 58%, 54% and 43% of the capacity we offered during the same period last year, before the COVID-19 pandemic.

For information on the measures we have taken in response to developments relating to the spread of COVID-19, see “Item 4. Information on the Company—B. Business Overview—Recent Developments—Developments Relating to COVID-19.”

BRW has pledged its common shares of Avianca Holdings to secure its obligations under the United Loan Agreement. BRW is in breach of certain provisions of the United Loan and United has commenced the exercise of remedies against BRW and its holding company, BRW Holding.

In November 2018, under the terms of the United Loan Agreement, BRW pledged to Wilmington Trust, as collateral agent for the benefit of United, 78.1% of our common shares (the “BRW Pledged Shares”), among other assets, as security for BRW’s obligations under the United Loan Agreement. In addition, Kingsland pledged to Wilmington Trust, as collateral agent for the benefit of United, all of the common shares that it owns in Avianca Holdings (representing 21.9% of our common shares) as security for the payment and performance of certain contractual obligations owed by Kingsland to United under certain contractual arrangements, including an upside sharing agreement, a put option agreement and a cooperation agreement.

Following defaults by BRW under the United Loan Agreement, United accelerated the United Loan Agreement and, in May 2019, commenced the exercise of remedies against BRW and BRW Holding. Pursuant to the terms of the United Loan Agreement, United appointed Kingsland as the Independent Third Party entitled to exercise voting control over BRW and, as a result, BRW Holding (and, indirectly, Synergy) lost the right to direct the manner in which BRW votes the BRW Pledged Shares. Through its ownership of our common shares and its authority as manager of BRW (with the right to direct the voting of the BRW Pledged Shares), Kingsland assumed voting control over Avianca Holdings.

While economic ownership of the BRW Pledged Shares has not been transferred, future enforcement actions may include Kingsland and/or United taking steps to enforce the share pledge and ultimately foreclose on the BRW Pledged Shares, resulting in a sale of Avianca Holdings to a third party. Unless such sale or transfer is made to United or Kingsland, this change of control could constitute an event of default under several of our financing agreements, including material bilateral and multi-lender credit facilities, our senior notes and all of our ECA financings covering a substantial portion of our aircraft whichfleet, unless a waiver is obtained from the relevant creditors. While we have secured waivers of such change of control events of default relating to certain possible purchasers of our equity from certain of our creditors, there are a number of different definitions of change of control in our financing agreements, and any future determination of whether a change of control has occurred may resultbe a complex assessment and may not be without doubt.

Furthermore, any breach of the obligations of Kingsland that are owed to United and secured by the common shares that Kingsland owns may also entitle United to take enforcement action in respect of such shares. We cannot assure you that, as a consequence of these arrangements, our current controlling shareholders will keep their majority stake and/or exclusive voting control in Avianca Holdings. Finally, we cannot assure you that BRW Holding will not regain voting control of the common shares of BRW.

As of the date of this annual report, creditor claims regarding defaults under our aircraft purchase contracts with Airbus, Boeingpayment obligations and ATR other covenants are subject to developments relating to our Chapter 11 proceedings and we cannot assure you the outcome of these proceedings. In addition, we cannot assure you there will not be a change of control if and when we emerge from Chapter 11.

If BRW Holding (and, indirectly, Synergy) prevails in its claim against Kingsland and United, and/or inrepays the delay or abandonment of some or allamounts due under the United Loan Agreement, it could regain control of our planned expenditures,common shares.

In May 2019, Kingsland filed a complaint against BRW and BRW Holding seeking, among other things, to foreclose on the collateral under the United Loan Agreement. In July 2019, BRW and BRW Holding filed a response to such complaint together with a counterclaim seeking, among other things, to dismiss Kingsland’s petitions and to recover its voting rights in Avianca Holdings, including the right to direct the voting of the BRW Pledged Shares. Neither we nor our subsidiaries are party to these claims.

The outcome of the claim between Kingsland and BRW and BRW Holding is, as of the date of this annual report, uncertain. If BRW and BRW Holding were to prevail in their requests, BRW Holding (and, indirectly, Synergy) could regain control of our common shares, including the right to direct the manner in which BRW votes the BRW Pledged Shares. Likewise, BRW Holding could, at any time, repay the amounts due under the United Loan Agreement and recover the ownership of our common shares and its voting rights.

If BRW Holding (and, indirectly, Synergy) recovers its rights to our common shares, it would become our controlling shareholder, with effective voting control, and would likely make significant changes to our board of directors and management. This voting control would give it the power to control certain actions that require shareholder approval under our articles of association, including approval of mergers and other business combinations and changes to our articles of association. This voting control could cause transactions to occur that might not be beneficial holders of the ADSs and could prevent transactions that would be beneficial to holders of the ADSs. In addition, BRW Holding would not be precluded from causing our direct parent company, Synergy, from

selling the controlling interest in turn,us to a third party. This could trigger a change of control that could ultimately constitute a default under certain of our financing facilities which could materially and adversely affect us. As of the date of this annual report, the outcome of these claims is subject to, among other things, developments relating to our competitive positionChapter 11 proceedings.

The United Copa Transaction is subject to approvals, consents and clearances from regulatory authorities in multiple jurisdictions in North, Central and South America and could be subject to conditions that could prevent or materially affect its consummation and, if approved, we may not extract its full anticipated benefits.

In November 2018, Avianca entered into the United Copa Transaction to enhance our business, financial condition, resultspassenger and cargo services between the United States and 19 countries in Latin America. Under the expected partnership terms, we plan to share revenue, integrate services and coordinate pricing and schedules with United and Copa for service in these regions to align frequent flyer programs, coordinate flight schedules and improve airport facilities. There can be no assurances, however, that the United Copa Transaction will be consummated, as it remains, as of operations, cash flowsthe date of this annual report, subject to regulatory approvals, consents and prospects.clearances in multiple jurisdictions, which will likely be delayed as a result of developments relating to the COVID-19 outbreak, or that, if consummated, unexpected transaction costs will not arise or that the full expected benefits of the transaction will materialize.

We have experienced recent ratings downgrades.

Major rating agencies, including Fitch Ratings (“Fitch”) and Standard & Poor’s Financial Services LLC (“S&P”), have recently downgraded our credit ratings, suggesting the likelihood that we will be able to repay our existing debt obligations has diminished. On April 2, 2020, amid developments relating to the spread of COVID-19, Fitch downgraded our credit rating from “CCC+” to “C,” followed by a subsequent downgrade in May 2020, following our filing for Chapter 11 proceedings, to “D.” In March 2020, S&P downgraded our credit rating from “B-” to “CCC” amid developments relating to the spread of COVID-19, followed by subsequent downgrades in May 2020 to “CCC-” and, following our filing for Chapter 11 proceedings, to “D”. As of the date of this report, both S&P and Fitch Ratings maintain the company’s credit rating at “D”.

We have significant indebtedness, fixed financing and financingother costs and our debt and lease financing agreements contain restrictive covenants and events of default that impose significant operating and financial restrictions on us.

As of December 31, 2020, we had $6,281.3 million of total debt outstanding and our interest expense in 2020 was $378.3 million. In addition, as of December 31, 2020, we had purchase agreements to acquire 88 aircraft to be delivered between 2024 and 2029. In January 2020, we amended certain of these purchase agreements to postpone aircraft deliveries initially scheduled for between 2020 and 2024 for delivery between 2025 and 2029. We 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 these purchase obligations, which are subject to developments relating to our aircraft financing obligations. As of December 31, 2015, we had $3,473.0 million of total debt outstanding. Our interest expense was $169.4 million in 2015. For the year ended December 31, 2015, our aircraft rental expense under aircraft operating leases aggregated $317.5 million, and our facility rental

costs aggregated more than $29.8 million. In addition, we have entered into agreements to acquire up to 141 Airbus and eight Boeing to be delivered between 2016 and 2025. On April 30, 2015, the Company signed a Purchase Contract for a total of 100 A320 New Engine Option (NEO) family aircraft to be delivered between 2019 and 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 2016, 2017, 2018 and 2019 and certain changes to the type of aircraft (both upgrades and downgrades), but did nto alter the total deliveries scheduled between 2016 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 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 ofOur 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.leveraged.

We have recently experienced ratings downgrades.

Major rating agencies, including Fitch and Standard and Poor’s, have recently downgraded us, suggesting the likelihood that we will be able to repayAdditionally, our existing debt obligations has diminished. This will likely make it more difficult for us to 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, 2015, the balance of our aircraft off-balance sheet arrangements was $981.8 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 plan, many of which could be through operating leases.

Our existing debt and lease financing arrangementsagreements 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 restrictionsus, including limitslimitations on our ability and our subsidiaries’ ability to incur additional debt, create liens and make certain investments. SomeAs of the date of this annual report, creditor claims regarding defaults under our payment obligations and other covenants are subject to developments relating to our Chapter 11 proceedings. We expect that we will need to refinance a portion of our DIP financing in order to emerge from Chapter 11; we may otherwise face the risk of liquidation under Chapter 7 of the Bankruptcy Code. Moreover, as part of our Chapter 11 proceedings, our creditors and bondholders will not receive complete recovery for their claims.

Any violation or alleged violation of anti-corruption, anti-bribery, anti-money laundering and sanctions laws could adversely affect us.

We are subject to several anti-corruption laws, including the U.S. Foreign Corrupt Practices Act of 1977 (“FCPA”). The FCPA generally prohibits companies and their intermediaries from making improper payments to foreign officials with the purpose of obtaining or keeping business and/or other benefits. There can be no assurance that our employees, executives, board members, agents and the companies to which we outsource certain of our business operations, will not take actions in violation of our anti-corruption, anti-bribery and anti-money laundering policies or applicable law, for which we may be ultimately held responsible. Any allegations or investigation relating to such violations may harm our reputation and adversely affect us.

Through our internal processes, we discovered a business practice whereby company employees, which may include members of our senior management, as well as certain members of our board of directors, provided “things of value,” which we currently believe to have been limited to free and discounted airline tickets and upgrades, to government employees in certain countries. We commenced an internal investigation and retained outside counsel and a forensic investigatory firm to determine whether this practice may have violated the FCPA or other potentially applicable anti-corruption laws. Based on our internal investigation to date, we have improved our policies and implemented additional controls designed to screen the recipients of tickets and to restrict the issuance of free or discounted tickets to government employees. On August 13, 2019, we voluntarily disclosed this investigation to both the U.S. Department of Justice and the SEC, and we are cooperating with both agencies. We also disclosed this investigation to the Colombian Financial Superintendency (Superintendencia Financiera de Colombia, “SFC”) and the Colombian Office of the Attorney General, and we are cooperating with them. As of the date of this report, the investigations remain ongoing.

In January 2020, our primary aircraft supplier Airbus entered into a settlement with authorities in France, the United Kingdom and the United States regarding corrupt business practices. Airbus’ settlement with French authorities references a possible request by an Avianca “senior executive” in 2014 for an irregular commission payment, which was ultimately not made. As a result of this development, we have voluntarily initiated an internal investigation to analyze our commercial relationship with Airbus and to determine if we have been the victim of any improper or illegal acts. We have disclosed this internal investigation to the U.S. Department of Justice and the SEC, as well as the Superintendency of Industry and Commerce and the Colombian Office of the Attorney General. We are cooperating with all agencies. Our internal investigations are not complete and we cannot predict the outcome of these covenants requireinternal investigations or what potential actions may be taken by the U.S. Department of Justice, the SEC or local regulators or officials. If it is found that these business practices violated the FCPA or other similar laws applicable to us, or 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 compliance with minimum debt service coverage, capitalization ratios, cash levels and 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 with these covenants could result in an event of default or refusal by our creditors to renew certain loans.

We have in the past and may in the future fall out of compliance with financial covenants in our debt agreements. Currently, we arewere at any time not in compliance with someany other laws governing the conduct of our business, we could be subject to criminal and civil remedies, including sanctions, monetary penalties and regulatory actions, which could materially and adversely affect us. The senior executive is no longer employed by the company and as of the financial covenants in our debt agreements. Althoughdate of this report, no criminal or civil actions or remedies have been brought against the company by any authority. As of the date of this report, the investigations remain ongoing.

In 2019, we have obtained waivers for these incidences of non-compliance currently and in the past, we cannot give any assurancebecame aware that we will be ablewere subject to obtain waiversU.S. jurisdiction for any future failures to meet financial covenants, or that our lenders will not declare defaults or acceleratepurposes of certain U.S. sanctions laws and regulations administered by the repaymentOffice of our debtForeign Assets Control (“OFAC”) of the U.S. Department of the Treasury as a result of such failures.

the November 2018 transfer by Synergy of approximately 78% of our voting common shares to BRW, a Delaware limited liability company wholly owned by Synergy. We recently began preparingengaged outside counsel and identified that our financial statementsregularly scheduled commercial passenger flights between cities in accordance with IFRSCentral and South America and Havana, Cuba and related Cuba operations may have constituted inadvertent violations of U.S. sanctions laws and regulations, specifically, of the U.S. Cuban Assets Control Regulations (the “CACR”). In September, October and November 2019, we submitted to OFAC a voluntary self-disclosure addressing these potential inadvertent violations. We no longer operate any flights to Cuba, nor do we maintain commercial activities in Cuba or sell any passenger or cargo tickets or other bookings involving Cuba (including via our codeshare and interline partners). We remain in the process of reimbursing certain passengers whose travel to Havana was canceled as a result of these measures. Furthermore, we have revised our loyalty processes and implemented action plans to block calls, freeze members’ accounts and stop new members’ enrollment that may come from OFAC sanctioned countries, including Cuba. In addition, and as a result,part of a new development, any access made or intended from an IP from sanctioned countries will be blocked and a message will be displayed with terms similar to: “this services/page is not available

in your country”. OFAC countries will not appear as options for “residence address” or “mailing address” upon enrollment of new members. We have also issued written cancellations of all our available financial datacontracts involving Cuban counterparties. As of the date of this report, the investigations remain ongoing.

If our new aircraft are not delivered or placed into service on time and on competitive terms, which are subject to our Chapter 11 proceedings, or if new aircraft do not perform as expected, we may be adversely affected.

We have entered into aircraft purchase agreements and our fleet plan depends on the timely delivery of these aircraft, which is limited.subject to several uncertainties, including production restraints of our suppliers, unexpected safety or other operational problems that could cause aircraft to be grounded, as has happened with Boeing MAX aircraft operated by other airlines, and our ability to obtain necessary aircraft financing.

Even if our new aircraft are delivered on time, any difficulties or delays in obtaining necessary certifications from regulatory authorities, registration of the aircraft or parts and other buyer-furnished equipment (such as in-flight entertainment systems), or any non-compliance of the new aircraft and their components with agreed specifications and performance standards, may materially and adversely affect us. For example, due to an industry-wide issue in 2018 and 2019 relating to Rolls Royce engines used on the Boeing 787 fleet, we experienced periods of unavailability of our Boeing 787 aircraft pending engine maintenance by Rolls Royce, which caused us to incur unanticipated costs.

Further, we may experience difficulties in integrating new aircraft into our fleet, including in relation to the additional costs, resources, space, personnel and time needed to hire and train new pilots, technicians and other skilled support personnel to operate new aircraft. Any failure to integrate newly purchased aircraft into our fleet as planned might require us to seek extensions of the terms for some of our existing leased aircraft, which may require us to operate existing aircraft beyond the point at which it is economically optimal to retire them, resulting in increased maintenance costs.

As of December 11, 2012, our board of directors approved the adoption of IFRS. We used a transition date of January 1, 2011,this annual report, claims regarding defaults under our lease payment obligations 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 requiredother covenants are subject 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 yearsdevelopments relating 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.Chapter 11 proceedings.

Our maintenance costs will increase as our fleet ages.ages, and we would be adversely affected due to unplanned stoppages related to maintenance.

Because the average age of our operative fleet was approximately 6.2 years as of December 31, 2015, our fleet requires less maintenance now than it will in the future. As of December 31, 2015,2020, our jet passenger operativeoperating fleet had an average age of approximately 5.7 years,8.72 years; our jet passenger operating fleet had an average age of 8.11 years; our cargo fleet had an average age of approximately 18.2 years17.45 years; and our turboprop operativeoperating fleet had an average age of approximately 4.06.79 years. OurIf our fleet ages and is not replaced or the warranties covering our fleet expire and are not renewed, we expect our maintenance costs can be expectedexpenses to increase significantly, both on an absolute basis and as a percentage of our operating expenses. Any significant increase in maintenance and repair expenses ifwould adversely affect us.

Unplanned stoppages or suspensions of operations associated with planned or unplanned maintenance due to mechanical issues, including, for example, any design defect or mechanical problem that would cause our fleet agesaircraft to be grounded during repair, would adversely affect our operation. We cannot assure you that we would succeed in obtaining all aircraft and such fleet is not replacedparts to solve any defect or mechanical problem, or that we would do so in a timely manner, or that we would succeed in solving any defect or mechanical problem, which could result in a suspension of the warranties covering such fleet expireoperations of certain of our aircraft, potentially for a prolonged period of time, and are not renewed.could adversely affect us.

We depend on our strategic alliances orand our commercial relationships,partnerships, such as our Star Alliance membership, in Star Alliance, in many of the countries in whichwhere we operate andin order to carry out our business may sufferstrategy. We would be adversely affected if any of our strategic alliances or commercial relationships were to terminate.

In many of the jurisdictions in which we operate in, we have found it in our interest to maintain a number of alliances and other commercial relationships.partnerships. We depend on these alliances and/orand commercial relationshipspartnerships 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,partnerships, in particular with Star Alliance or its members, deteriorates, or are terminated, we would be adversely affected.

We are a party to codeshare agreements with various international air carriers, which provide that certain flight segments operated by us are held out as our codeshare partners’ flights, as the case may be, and that certain of our codeshare partners’ flights, as the case may be, are held out for sale as Avianca flights. In addition, these agreements

provide that our LifeMiles members can earn miles on or redeem miles for these codeshare partners’ flights, as the case may be, and vice versa. We receive revenue from flights sold under these codeshare agreements. In addition, we believe that these arrangements are an important part of our LifeMiles program. The loss of a significant partner through bankruptcy, consolidation or otherwise could adversely affect us. We could also be adversely affected by the actions of one of our codeshare partners, for example, in the event of nonperformance of material obligations or misconduct, which could potentially result in us incurring liabilities, or poor delivery of services by one of our codeshare partners, which could adversely affect our brand and customer perceptions.

We may be adversely affected if LifeMiles loses business partners or if these business partners change their policies in relation to the granting of benefits to their clients.

LifeMiles relies on its main business partners (including over 100 financial services companies with which LifeMiles has co-branded credit card and miles conversion agreements) for a significant portion of its gross billings. A decrease in miles sold to one of LifeMiles’ key business partners for any reason, including a temporary or permanent downturn in their business or financial condition, a decrease in their activity or their development of new loyalty strategies for their respective clients, could adversely affect LifeMiles and its financial condition. In addition, a decision by one of these key partners to not participate in the LifeMiles program could adversely affect us.

Most agreements with LifeMiles’ business partners, other than Avianca, have terms of up to seven years and may be terminated or renewed under same or different terms when they expire. For example, co-branded credit card agreements with financial services companies typically have five to seven-year terms. Agreements with other business partners often have shorter terms. In addition, some of these agreements aremay be terminated prior to expiration in the case of any material uncured breach by LifeMiles. Any such termination or inability to renew these agreements could materially and adversely affect LifeMiles and, consequently, us.

We do not exercise control or influence over the commercial policy of several of LifeMiles’ partners. Some partners may freely change their policies for accumulating, transferring and redeeming miles, as well as develop their own platforms for clients to exchange points for rewards, including airline tickets issued by other airlines, and as a result reduce demand for and revenue generated by LifeMiles. Changes in these policies may (i) make the LifeMiles program less attractive or efficient for the clients of its partners and (ii) increase competition in the loyalty program sector, which in turn may reduce the demand for miles, increase downward pressure on the average price of miles and adversely affect LifeMiles. If the loyalty program sector does not grow enough to absorb new participants or if LifeMiles does not adequately react to the market or to the policies of its partners, LifeMiles and we may be adversely affected.

Any interruption, destruction or loss of data in our information technology systems, including at LifeMiles, due to cyberattacks could materially and adversely affect on our reputation, business, financial condition and results of operations.

We and our service providers are subject to a variety of information technology and system cyber threats as a part of our normal course of operations, including computer viruses or other malware, cyber-fraud, data breaches and destruction or interruption of our information technology systems by third parties or our own personnel. Any of these or other events could cause interruptions, delays, loss of critical or sensitive data, misappropriation of or unauthorized access to personal or sensitive data or failure to comply with regulatory or contractual obligations with respect to such information, which could result in legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information, any of which may adversely affect us. Our business, financial condition and results of operations. In an attempt to avoid materialization of potential risks, we have put in place cybersecurity governance which includes technological and process controls. Even though we will continue our efforts to protect the systems and information, these cyber threats are constantly evolving, therefore, we may not be able to prevent the materialization of all risks data breaches, incidents or cyber-attacks. We are not fully compliant with the latest PCI-DSS standards; Due to an important decrease in credit card transaction volume in 2020 caused by the COVID-19 pandemic VISA decided to exonerate Avianca from PCI compliance. Despite this decision, Avianca continues to work on achiving compliance in the future.

Like other large multinational corporations, we have experienced cybersecurity incidents. These incidents have not had a material impact on our operations, but we cannot assure that we will not experience additional incidents that may materially and adversely affect us.

We rely on automated systems to operate our business, and any failure of these systems could adversely affect us.

We rely on automated systems and technology to operate our business, enhance customer service and reduce operating expenses. The performance and reliability of our automated systems and data center infrastructure is critical to our ability to operate our business and compete effectively. These systems include our computerized airline reservation system, flight operations system, telecommunications systems, website, engineering and maintenance systems, check-in kiosks, in-flight entertainment systems and our primary and secondary data centers. Our computerized airline reservation system, and website must be able to accommodate a high volume of traffic and deliver important flight information. These systems require upgrades or replacement periodically, which involve implementation and other operational risks. We may be adversely affected if we fail to operate, replace or upgrade our automated systems or data center infrastructure.

In certain cases, we rely on third-party providers of automated systems and data center infrastructure, including for technical support. If these providers were to fail to adequately provide technical support for any one of our automated systems or if new or updated components were not integrated smoothly, we could experience service disruptions, which could result in the loss of important data. Furthermore, our automated systems cannot be completely protected against events that are beyond our control, including natural disasters, computer viruses, other security breaches or telecommunications failures. Substantial or sustained failures in our automated systems could impact customer service and ticket sales. We cannot assure you that the security and disaster recovery measures and change control procedures we have implemented are adequate to prevent failures that could materially and adversely affect us.

If actual redemptions by LifeMiles members are greater than expected (other than redemptions in Avianca air tickets), or if the costs related to LifeMiles redemptions increase (other than costs of redemptions in Avianca air tickets), we could be negativelyadversely affected.

LifeMiles derives most of its revenues from the sale of miles. Based on historical data, the estimated weighted average period between the issuance of a mile and its redemption is approximately 10 months. However, LifeMiles cannot control the timing of the redemption of miles, or the number of miles ultimately redeemed. LifeMiles uses cash generated by the sale of miles to pay for redemption costs and maintains a cash reserve to cover estimated future redemptions. As a result, if the redemption costs that LifeMiles incurs in a given fiscal year exceed its available cash and new sales in that period, it may not have sufficient cash on hand to cover all actual redemption costs in that year or future years, which could materially and adversely affect it and us.

LifeMiles’ main operating expenses relate to the purchase of rewards, particularly airline tickets, in order to satisfy the redemption of miles by members. Because LifeMiles does not incur redemption-related costs for miles that are not redeemed and have expired, its profitability depends in part on the estimated percentage of miles issued that will never be redeemed by members, or “breakage.”

LifeMiles’ estimate of breakage is based on historical trends. We expect that breakage will decrease as LifeMiles expands its network of partners and makes a greater variety of rewards available to members. LifeMiles seeks to offset the decrease in breakage through increases in volume of miles sold and, where practicable, through adjustments to its pricing policy for miles sold to its partners. If actual redemptions exceed expectations and LifeMiles fails to increase the volume of its sales or to appropriately price its miles and rewards, its profitability and, consequently, our profitability could be adversely affected.

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

One of the elements of our business strategy is to savereduce costs by operating a simplified aircraft fleet. As of December 31, 2015, of the 191 aircraft that comprised our total fleet (including seven aircraft we lease or sublease to an entity indirectly controlled by José Efromovich, OceanAir, which conducts business under the trade name Avianca Brazil, and four inactive aircraft) 137 were Airbus. Our jet fleet also includes 12 Embraer aircraft, and we have also entered into agreements to acquire up to 15 Boeing 787 Dreamliners to implement our long-haul strategy. As of December 31, 2015, seven B787s have been received. We also completely replaced our regional turboprop fleet of Fokker 50s with new ATR72s. AsHowever, as a result of this strategy, we are increasingly reliant on a small group of suppliers—Airbus and Boeing—and are thus vulnerable to significant problems associated with the Airbus, Embraer, Boeing or ATR aircraft or the engines that power them,these suppliers, including, among others, in relation to design defects, mechanical problems, contractual performance, byadverse public perceptions and regulatory actions. Supplier concentration risks also extend to the manufacturers or adverse perception by the publicengines that would result in customer avoidance or in actions by the FAA or other regulators resulting in a reduced ability to operatepower our aircraft.

If any of Airbus Embraer,or Boeing or ATR or the manufacturers of the engines that power aircraft manufactured by 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.alternative suppliers. If we have to lease or purchase aircraft from another supplier, we could lose the efficiency and other benefits we derive from our current fleet composition.simplified aircraft fleet. We cannot assure you that any replacement aircraft would have the same operating

advantages as the Airbus Embraer,or Boeing or the ATR aircraft that currently comprise our fleet that would be replacedwe operate 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 couldWe may also be harmedadversely affected by the failure or inability of Airbus Embraer,or Boeing or ATR or the manufacturers of our engines to provide sufficient parts or related support services on a timely basis.

Our businessWe would be significantly harmedmaterially and adversely affected 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 useOperation of our aircraft could be suspended or restricted by regulatory authorities in the event of any actual or perceived mechanical or design problems. Our businessWe would also be significantly harmedadversely affected 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. CarriersHidden system failures in aircraft could result in accidents leading to the loss of life of passengers and third parties and damage to third-party property. In 2018 and 2019, the Boeing 737MAX suffered two fatal accidents within six months and the aircraft has been widely grounded around the world. We do not have any Boeing 737MAX aircraft in our fleet or on order. If any of the types of aircraft we operate are subject to grounding, we would be materially and adversely affected. Airlines that operate a more diversified fleet are better positioned than we are to manage suchthese types of events.

In the context of our Chapter 11 proceedings, certain of our agreements with suppliers may be rejected.

Our operational growth dependsWe are highly dependent on the airport infrastructure in our hubs at Bogotá’s El Dorado International Airport Lima’s Jorge Chavez International Airport and El Salvador’s International Airport Monseñor Oscar Arnulfo Romero y Galdámez.and confront structural challenges at each of these airports.

Our business is heavilyWe are highly dependent on our operations at our hubs in Bogotá and El Salvador, and will become increasingly dependent on our Bogotá hub consisting of El Dorado International Airport andPuente Aéreo. During 2015, approximately 77%as we streamline our network. Many of our domestic flights androutes operate through these hubs, which accounted for approximately 33%76% of our total international flights either departed from or arrived at ourdaily arrivals and departures in 2020 (with 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.

accounting for 66%). 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.

As our operations become increasingly focused around our Bogotá hub, we will have to address challenges related to El Dorado International Airport, which faces significant traffic congestion due to the lack of capacity in ground and air operations. The reduced number of terminal parking stands and the recurring adverse weather conditions affect airport capacity and, consequently, our operations.

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 tomeasures, any of which could affect one or more of our hubs or other airports where we operate. Limited parking positions and infrastructure challenges are among the lack of capacityrisks we face in flight and ground operations. IATA is currently providing advisory services to the Colombian Civil Aviation Authoritytrying to improve overall runway capacityour operations at our hub airports and ground movement patterns at El Dorado International Airport, butother airports where 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. Delaysoperate. Airport-related challenges inconvenience passengers, reduce aircraft utilization and increase costs, all of which negativelyadversely 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 Woldwide 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 54% 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. The expansion plan of the El Dorado International Airport announced by the Colombian government seeks to increase the terminal capacity and size, improve its infrastructure, its process and customer service and its benefit operations by 2018. By the end of 2015, the new control tower infrastructure was finalized and operational tests began. We expect that in the first semester of 2016, the airport’s operation will be managed by the new control center 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 50 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. Currently, we operate 30% of our flights in remote parking positions, causing 20% of our delays. 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 have been postponed for 2017 due to new decisions from the Peruvian government. 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 50 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.us.

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 systemsand distortions and other related IT systems we use to process our accounting transactions.disruptions may occur during the implementation period.

We aremay experience problems with the operation of our information technology systems or the information technology systems of third parties on which we rely, as well as the development and deployment of new information technology systems, any of which could adversely affect, or temporarily disrupt, all or a portion of our operations. As we implement these information technology upgrades, distortions may occur in the process of incorporating new information technology systems,phasing-in. Accordingly, adjustments may be required during 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. period.

We are in the process of incorporating new information technology systems to improve our flight operations and integrate our legacy Avianca and Taca systems. Although we seek to implement our new flight operations systems during 2016, we cannot assure you wethat information technology failures will be able to do so. Our incorporationnot occur as a result of thesethe ongoing implementation of new systems. Challenges and delays in implementing new systems, is intendedas well as the possibility of human failure when dealing with new systems, could affect our ability to help us increase revenue, reduce costs, enhancerealize projected or expected cost savings and improve operating efficiency and customer satisfaction and increase operating 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, whichas anticipated. Additionally, any information technology failures 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.

We face significant challenges which may limitus and impede our ability to grow our cargo business.

Our cargo business is highly sensitive to macroeconomic conditionstimely collect and to significant competitive pressures. The air cargo business is generally volatile and reacts quickly and often disproportionately to changes in economic conditions. For example, a decrease of a certain percentage in GDP or consumer demand oftenreport financial results in a disproportionately larger decreaseaccordance with applicable laws or result in demand for air cargo services, as cargo customers elect to suspend restocking orders and reduce existing inventories and/or to use cheaper forms of transportation for their goods. Although global air freight growth was healthier in 2015 compared to 2014 (2.5% measured in revenues ton per kilometer), such trend was not the same in Latin America, where cargo traffic measured in RTKs decreased by 6.0%, and in North America it increased only by 0.4%. Several Latin American countries, in particular Argentina, Brazil and Venezuela, may continue to face economic challenges that may impact both import and exports of goods.

A competitive environment and excess capacity in most markets continuously puts pressure on yields. This situation may be worsened by continued low fuel prices which may cause increased capacity in certain routes by competitor airlines, adversely affecting yields and market share and therefore expected profitability.

Cargo demand and flows are unidirectional, and dependent on a small number of product categories. This structural imbalance between inbound and outbound flows poses a challenge to freighter operations as lack of demand in a particular direction may force airlines to rely on different markets in order to maximize loads on return flights. Product concentration may also enhance this challenge, as the volume of goods that we transport on a specific direction may be strongly affected by any event that negatively affects the production of these goods (for example fresh flowers from Ecuador and Colombia).

During 2015, the continued depreciation of regional currencies compared to U.S. dollars has had a detrimental impact on the purchasing power of South American economies as well as a significant decrease on the import of goods and services.data losses.

Regarding our recent investment in Aerounión, if we fail to achieve the expected synergies from this acquisition in a timely manner, we may not meet the expected return of investment within the timeframe originally contemplated.

We rely on third parties to provide us with parts and services.

We have entered into agreements with, and depend upon, a number of suppliers for our parts and enginesservices, including for both provisioning and maintenance. We also have entered into agreements with third-party contractors to provide us with call-centercall center services, catering, ground handling cargo and baggage handling and “below the wing” aircraft services. It is our general policy that our agreements with suppliers and third-party contractors are subject to termination on short notice. In some cases, we would be forcedhave to pay penalties for terminating contracts on short noticenotice. Our suppliers and ourthird-party contractors havemay also the right to terminate agreements on short notice the agreements entered into with us. The terminationnotice. Termination of these agreements or our inability to renew these agreements or to negotiate new agreements with other providerssuppliers and third-party contractors at comparable rates could harm our business and results of operations.adversely affect us. Further, our reliance on third parties to provide essential suppliessuppliers and services onthird-party contractors limits our behalf gives us less control over the costs, efficiency, timeliness and quality of those supplies and services. We expect to beremain dependent on such agreementssuppliers and third-party contractors for the foreseeable future,future. In the context of our Chapter 11 proceedings, certain of our agreements with suppliers and if we enter any new market, we will need to enter into additional similar agreements.third-party contractors may be rejected.

Our business is highly regulated and changes in the regulatory environmental in which we operate may adversely affect our business and results of operations.

Our business is highly regulated and substantially depends upon the regulatory environment in the countries in which we operate or intend to operate. For example, price controls on fares may limit our ability to effectively apply customer segmentation profit maximization techniques (management techniques that use passenger demanding forecasting and fare-mix optimization techniques to maximize profit for an airline) and adjust prices to reflect cost pressures. High levels of government regulation may limit the scope of our operations and our growth plans, especially in the event of deterioration of the relations between the countries in which we operate or the public perception of foreign companies in local markets. Accordingly, regulatory issues could adversely affect our business and results of operations.

Our business, financial condition and results of operations could be adversely affected if we fail to maintain the required governmental authorizations in the various jurisdictions where we operate. In order to maintain the necessary authorizations issued by the different civil aviation authorities in jurisdictions where we operate, we must continue to comply with applicable statutes, rules and regulations pertaining to the airline industry, including any rules and regulations thatWe may be adopted in the future. We cannot predict or control any actions that the civil aviation authorities or other aviation regulators may take in the future, which could include restricting our operations or imposing newmaterially and costly regulations.

We are also subject to international bilateral and multilateral air transport agreements that provide for the exchange of air traffic rights between the different countries, and we must obtain permission from applicable governments to provide service to international destinations. Bilateral aviation agreements as well as local aviation approvals frequently involve political and other considerations beyond our control. A modification, suspension or revocation of one or more bilateral agreements could have a material adverse effect on our business, financial condition and results of operations. The suspension of our permission to operate in certain airports or destinations or the imposition of other sanctions could also have a material adverse effect. A change in the administration of current laws and regulations or the adoption of new laws and regulations in any of the countries in which we operate that restricts our route, airport or other access may have a material adverse effect on our business, financial condition and results of operations. We cannot give you any assurance that existing bilateral agreements among the countries in which we are based and to which we fly, and permits from local and foreign governments, will continue, or that we will be able to obtain more traffic rights to accommodate our future expansion plans.

Further, if we are unable to obtain favorable take-off and landing authorizations at certain high-density airports, our business, financial condition and results of operations could be adversely affected. There can be no assurance that we will be able to obtain all requested authorizations and slots in the future because, among other factors, government policies regulating the distribution of the authorizations and slots are subject to change.

In addition, certain of the bilateral air transport agreements, including, among others, agreements of Colombia with Bolivia, Ecuador, Mexico, Peru, Panama, Chile, Argentina, the Dominican Republic, Cuba, the Netherlands and Costa Rica contain the requirement that our relevant operating subsidiaries must be incorporated and have their principal domicile, management, operations, technical maintenance and offices in certain designated countries. Also, all of the agreements negotiated by El Salvador (except for the agreements with Ecuador, Colombia, Emirates, Qatar and Chile) contain a clause that our airline in El Salvador (Taca International) remains substantially owned and effectively controlled by Salvadoran nationals. A substantial part of the agreements negotiated by Costa Rica also contain ownership and control requirements.

Other bilateral air transport agreements, including, among others, agreements with the United States and Brazil, contain requirements that we remain substantially owned and effectively controlled by a national governmental entity or its nationals. We cannot assure you that national citizens, directly or indirectly, will continue to own and control a majority of our capital stock indefinitely. For example, if for any reason Germán Efromovich, José Efromovich and/or Roberto Kriete, who each have different citizenships and are the beneficial owners of all of our common stock, cease to have substantial ownership of our capital stock, or the effective control of our management and operations ceases to be exercised by nationals, or if we fail to continue to have our corporate domicile, administrative headquarters, and our base of operations within each territory, we may no longer comply with the requirements of bilateral agreements and, as a result, our route and landing rights in a number of important countries may be adversely affected which could have a material adverse effect on our business, financial condition and results of operations. A modification, suspension or revocation of one or more bilateral agreements and other permission from applicable foreign governments could have a material adverse effect on our business, financial condition and results of operations. See “Item 4. Information on the Company—Part B. Business Overview—Regulation.”

As of December 31, 2015, approximately 70.7% of our total fleet was U.S.-registered. The U.S. Federal Aviation Administration, or FAA, and the European Aviation Safety Agency, or EASA, are our most significant foreign government regulators. For example, the FAA from time to time issues directives and other regulations relating to the maintenance and operation of aircraft that require significant expenditures. FAA requirements, which apply to our U.S.-registered aircraft, cover, among other things, collision avoidance systems, airborne wind shear avoidance systems, noise abatement and other environmental issues, and increased inspections and maintenance procedures to be conducted on older aircraft. We expect to continue incurring expenses to comply with these and other international government regulations, and any increase in the cost of compliance could have an adverse effect on our financial condition and results of operations. Additional new regulations continue to be regularly implemented by various U.S. and European agencies, including, among others, the U.S. Transportation Safety Administration, or TSA, and the U.S. Drug Enforcement Agency. We cannot assure you that the laws and regulations of the jurisdictions to which we fly (including, without limitation, immigration and security regulations, which directly affect passengers) will not change or that new laws adverse to us will not be enacted, and any such events may adversely affect our business, financial condition and results of operations.

Our reputation and financial condition would be harmed in the event of an accident or major incident involving our aircraft or aircraft of the types we use.operate or if our aircraft are grounded for any reason.

Between 1988 and 1993 Avianca had four serious accidents involving significant fatalities. More recently, in 2008, one of Taca’s aircraft had an accident involving five fatalities after landing in Tegucigalpa, Honduras. An accident or major incident in the future involving one of our aircraft could result in significant claims by injured passengers and/or relatives and others, as well as significant costs related to the repair or replacement of a damaged aircraft and its temporary or permanent removal from service.

We are required by our creditors and the lessors of our aircraft under our operating lease agreements to carry liability insurance. The insuranceWe believe the coverage and conditions set forth in our liability insurance policies are in accordance with the practice for internationally recognizedinternational airlines and comply with the requirements of the aviation authorities in the countries where we operate. However, if the liability insurance coverage iswe maintain may not sufficient to cover the potential liabilities incurred from a loss,be adequate and we may suffer a significant financial impact as we would be liable for any amounts exceeding our insurance coverage.forced to bear substantial losses in the event of an accident or major incident. Our insurance premiums may also increase significantly due to ansignificantly. Moreover, any accident or major incident affecting one ofinvolving our aircraft. Substantial claims resulting from an accident in excess of our related insurance coverage or increased premiums would harm our business and financial results. Moreover, any aircraft, accident or incident, even if fully insured, or the aircraft of any major airline, especially if aircraft of the types we operate, could cause negative public perceptions about us, our aircraft or the public to perceive us as less safe or reliable than other airlines, which could materially and adversely affect our results of operations and business prospects. Our business would also be significantly harmed if the public were to avoid flying with usair transportation generally, due to an adverse perception of an aircraft type, safety concerns or other problems, whether real or perceived, or in the event of an accident involving an aircraft of a type that we operate.

We are subject to litigation that could negativelywhich would adversely affect our profitability and cash flow or have a material adverse effect on our business, financial condition or results of operations.

Our future profitability and cash flows could be affected by an adverse ruling in any of the potentially significant lawsuits currently pending against us or that may be filed against us in the future. We cannot give you any assurance that we will be successful in any of such lawsuits.

Some of our subsidiaries are currently defendants to several lawsuits of a civil, commercial or labor nature originating from alleged acts or omissions related to their activities as carriers or as employers, with varying claims for damages on legal and contractual bases. See “Item 8. Financial Information—Part A. Consolidated Statements and Other Financial Information—Litigation” and “Note 32—Provisions for legal claims”us. Safety concerns relating to our audited financial statements as of and for the year ended December 31, 2015.

Additionally, there are several proceedings in which our subsidiaries are plaintiffs demanding that certain decisions of administrative authorities be declared null. In the event that our subsidiaries do not prevail in such proceedings, not only will the decisions of the authorities remain effective, but our subsidiariesaircraft may also be required to pay penalties, sanctions or other additional amounts.

Additionally, some tax returns filed on time with the different authorities are pending review in accordance with the applicable statute of limitations. The auditing of those tax returns may result in additional taxes, or interest, or penalties which could give rise to administrative proceedings with applicable authorities. Our business also makes us and our subsidiaries subject to potential lawsuits which have not yet materialized, but in the future could negatively impact our business.

Failure to comply with applicable environmental regulations could adversely affect our business and reputation.

Our operations are covered by environmental regulations at the local and national levels, in our hubs, focus markets and in foreign countries. These regulations cover, among other things, emissions into the atmosphere, disposal of solid waste and aqueous effluents, management and disposal of hazardous wastes, aircraft noise and other activities incident to our business. Future operations and financial results may vary as a result of such regulations. Compliance with these regulations and new or existing regulations that may be applicable to us in the future could increase our cost base and adversely affect our operations and financial results.

The European Union (“EU”) has adopted a directive under which the existing emissions trading scheme (the “ETS”) in each EU member state would be extended to airlines. This directive would requirecause us to submit annual emission allowances in order to operate routes toground our aircraft and, from EU member states. The ETS’s application to flights was scheduled to begin in 2012, however, its implementation to international flightsbecause our fleet plan has been delayedstreamlined by reducing the EU. The EU did not collect allowances from airlines in 2013 and only enforced the directive with respect to airlines that conducted intra-European flights during 2012.

Although it is uncertain when and if the ETS will be implemented, its effectiveness will depend on a potential consensus reached on ICAO’s discussion on global market-based measures, which will take place at the forecoming ICAO’s meeting to be held in the second half of 2016.

It is increasingly likely that we will be required to participate in some form of an international aircraft emissions program in the future.

The EU also adopted the 2012 Energy Efficiency Directive (Directive 2012/27/EU) (“EED”) to improve its energy efficiency in order to achieve the objective of saving 20.0% of energy consumption by 2020. The EED sets a number of requirements that EU member states are required to implement into their national legal system by June 5, 2014. The application of the EED to air transport raises two main issues: (i) when combined or replaced by an energy tax, the energy efficiency target may result in the taxation of fuel used in air transportaircraft and (ii) airlines will have to comply with the energy audit requirements in the different jurisdictions, which sometimes may apply for the same flights. The United Kingdom has already implemented the EED requirements into its legislation and we have been exempted from said requirements in the United Kingdom. However, in the case of Spain, the EED requirements have not been implemented into their legislation yet, and therefore, we cannot assure you if we will be exempted from complying with these requirements once they have been implemented into their national legal system.

Similarly, the Catalunya region has implemented a tax on nitrogen oxide (nox tax) emissions for its flights to and from the Catalunya region. Through international associations such as IATA, we have been contesting such taxes. Unfortunately, such tax is currently in force and we are required to pay such tax under protest, reserving our right to argue our position through other legal means.

Currently,fleet types we operate, three routes to and from Europe, and service additional destinations through our code-share agreements. The cost of compliance with any international emissions program, including the ETS, EED and/or national taxes imposed, is difficult to estimate; however, these costs could be significant and could require us to reduce our emissions, purchase allowances or otherwise pay for our emissions, which could have a significant impact on our operating costs or impact the frequency of our flights to and from EU member states, wegroundings may be required to participate in some form of an international aircraft emissions program in the future. Costs associated with compliance with any international emissions program, including the ETS, EED and/or national taxes imposed, could be significant and require us to reduce our emissions, purchase allowances or otherwise pay for our emissions, which could have a significant impact on our operating costs or impact the frequency of our flights to and from EU member states.

In addition, failure to comply with these regulations could adversely affect us inmore than our competitors that operate a variety of other ways, including adverse effects on our reputation. Remediation obligations can result in significant costs associated with the investigation and clean-up of contaminated properties, as well as damage claims arising out of the contamination of properties or any impact on natural resources.

Our ability to fly to the United States and the benefits of our strategic alliances or commercial relationships are dependent on the FAA’s continued favorable safety assessment of each of the three countries in which we have hubs.

The FAA periodically audits the aviation regulatory authorities of other countries. As a result of its audits, each country is given an International Aviation Safety Assessment, or IASA, rating. The IASA rating of each of Colombia, Peru, El Salvador, Ecuador and Costa Rica is currently “Category 1,” which means that each such country complies with the International Civil Aviation Organization, or ICAO, safety requirements. As a result, we may continue our service from our hubs in such countries to the United States in a normal manner and take part in reciprocal code-sharing arrangements with U.S. carriers. Nevertheless, any of these ratings may be downgraded for a variety of safety and other reasons. If a downgrading occurs, we will be prevented from offering flights to any new destinations in the United States and from certifying new aircraft for flights to the United States; in addition, our U.S. air carrier code share partners will be required to suspend placement of their codes on our flights.

If any of the countries in which we have a hub or focus is downgraded to “Category 2,” our ability to fly to the United States from such hub would likely be significantly restricted. We cannot assure you that the governments of Colombia, Peru, El Salvador, Ecuador and Costa Rica and their respective civil aviation authorities in particular, will continue to meet international safety standards, and we have no direct control over their compliance with IASA guidelines. If the IASA rating of any of Colombia, Peru, El Salvador, Ecuador or Costa Rica were to be downgraded in the future, this could materially and adversely affect our service to the United States, causing us to lose revenue, including revenue from code sharing, as a result of reducing flight options to our customers.

We rely on automated systems to operate our business, and any failure of such systems could harm our business.

We rely on automated systems to operate our business, and any failure of such systems could harm our business. We are dependent on automated systems and technology to operate our business, enhance customer service and reduce operating costs. The performance and reliability of our automated systems and data center is critical to our ability to operate our business and compete effectively. These systems include our computerized airline reservation system, flight operations system, telecommunications systems, website, engineering and maintenance systems, check-in kiosks, in-flight entertainment systems and our primary and secondary data centers. Our website and reservations system must be able to accommodate a high volume of traffic and deliver important flight information. These systems require upgrades or replacement periodically, which involve implementation and other operational risks. Our business may be harmed if we fail to operate, replace or upgrade our systems or data center infrastructure or contracted services successfully.

For some systems, we rely on the third party providers of automated systems and data center infrastructure as well as for technical support. If the current provider were to fail to adequately provide technical support for any one of our key existing systems or if new or updated components were not integrated smoothly, we could experience service disruptions, which, if they were to occur, could result in the loss of important data, increase our expenses, decrease our revenues and generally harm our business and reputation. Furthermore, our automated systems cannot be completely protected against events that are beyond our control, including natural disasters, computer viruses, other security breaches, or telecommunications failures. Substantial or sustained system failures could impact customer service and ticket sales. We have implemented security and disaster recovery measures and change control procedures; however, we cannot assure you that these measures are adequate to prevent disruptions, which, if they were to occur, could result in the loss of important data, increase our expenses, decrease our revenues and generally harm our business and reputation.more diverse fleet.

We may incur substantial compliance costs and facebe subject to severe sanctions if we fail to comply with U.S. and other international drug trafficking laws.

We are required to comply with strictthe drug trafficking laws mainly inof Colombia, the United States and the European Union, among other countries, and are subject to substantial government oversight in connection with the enforcement of suchthese laws. For example, the U.S. Foreign Narcotics Kingpin Designation Act and Executive Order 12978 contain a list of persons designated by the United States government as drug traffickers. This listtraffickers, which is periodically updated. Pursuant to these regulations, we may be subject to severe sanctions and reputational harm if we are found by the U.S. government to have intentionally or inadvertently assisted in the international narcotics trafficking activities of a designated person. Although we monitor this list in an effort to determine that we do not conduct business with any designated person, no assurance can be givenwe cannot assure you that the counterparties with whom we do business in the future will not be subject to or will comply with these regulations. In the event aregulations, in which case such counterparty of ours became a designated person, such party might face severe sanctions and as a result be unable to perform under their agreements with us.

We cannot assure you that we will succeed in complying at all times with suchthese laws. For example, in August 2004, the U.S. Attorney for the Southern District of New York advised us that, because of several seizures from our aircraft of baggage, catering and cargo containing narcotics, our security practices and procedures were inadequate. We were required to engage an internationally

recognized security consulting firm in order to identify and implement additional aircraft security measures and were also required to make additional investments in the area of aircraft and facility security. As part of our efforts to improve our practices, we developed a new security division which reports directly to our CEO, elevated our security standards with respect to hiring and operating procedures and increased training and supervision. The requirement to maintain this consulting arrangement was lifted two years after it was initiated by the U.S. Attorney for the Southern District of New York. In the event, however, that we violatefail to comply with any U.S. or other foreign narcotics restriction in the future,international drug trafficking laws, we may be subject to severe sanctions, severe fines, seizures of our planesaircraft or the cancellation of our flights.

Our resultsflights, any of operations fluctuate due to seasonalitywhich could materially and other factors.

We expect our quarterly operating results to fluctuate due to seasonality including high vacation and leisure demand occurring during the summer months of July and August and again during December and January. Actions of our competitors may also contribute to fluctuations in our results. As a result of this, our first quarter results are usually higher than our second quarter results. We are more susceptible to adverse weather conditions, including hurricanes, as a result of our operations being concentrated in Colombia, Central America and the Caribbean, than some of our competitors. As we enter new markets we could be subject to additional seasonal variations along with any competitive responses to our entry by other airlines. Price changes in aircraft fuel as well as the timing and amount of maintenance and advertising expenditures also impact our operations. As a result of these factors, quarter-to-quarter comparisons of our operating results may not be a good indicator of our future performance. In addition, it is possible that in any future period our operating results could be below the expectations of investors and any published reports or analyses regardingadversely affect us.

We are dependent on key personnel and we may be unable to attract and retain qualified, skilled employees necessary to operate our business.

Our success depends to a significant extent upon the efforts and abilities of our senior management team and key financial, operational and commercial personnel. Our employment agreements with members of our senior management team may be terminated by them at any time, without prior notice and without penalties. Furthermore, in certain countries we are not permitted to have non-competition agreements in place with members of our senior management team after termination of employment. In addition, our business is labor-intensive, and our operations

require us to employ a large number of highly-skilled personnel, including pilots, maintenance technicians and other skilled operating personnel. In some of the countries in which we operate, there is a significant shortage of qualified pilots and maintenance technicians or other qualifiedoperating personnel and we have faced considerable turnover of our skilled employees, many of whom have left us to work in other countries where compensation is higher, we haverequiring us to attract new people. Our business is also dependent on customer-service skilled employees, as we are focused on delivering superior customer experience, that skillset is a pre-requisite for all members of our Company.employees.

Further, shouldShould the turnover of suchskilled employees (particularly pilots and maintenance technicians) increase, our training costsexpenses would be significantly higher.increase. We cannot assure you that we will be able to recruit, train and retain the managers, pilots, maintenance technicians and other qualifiedoperating employees that we need to continue our current operations or replace departing employees. We have dedicated recruiting teams focused on hiring new personnel, mainly for our hubs.

A failure to hire and retain such qualified employees, at a reasonable costwhich could materially adversely affect our business, financial condition and results of operations.us.

LaborIncreases in labor benefits, union disputes, strikes and other labor-related disturbances may resultadversely affect us.

We operate in a material adverse effect on our resultslabor-intensive industry that is subject to the effects of operations.

Approximately 25% of our overall employeesinstabilities in the labor market, including strikes, work stoppages, protests, lawsuits and 32% of our pilots belong to achanges in employment regulations, increases in wages, controversies regarding salary and labor union. There are currently fifteen unions covering our employees. Eight of these unions are in Colombia: the National Workers Union of Avianca, the National Union of Aircraft Industry Workers, the Colombian Association of Flight Attendants, the Colombian Association of Civil Aviators, the Colombian Association of Aircraft Mechanics, the Colombian Association of Flight Engineers, the Colombian Union of Air Transportation Workersallowances and the Associationconditions of Tampa Cargo Workers. We also have employees covered by one labor union in Argentina, two in Mexico and two in Peru.

On October 2013, we negotiated a new collective bargaining agreement with the Colombian Association of Civil Aviators (ACDAC), but we did not reach an agreement. The prior collective bargaining agreement with ACDAC expired on March 2013 and was automatically extended for a six month period according to Colombian regulations. Pursuant to a judicial order, we were required to resume our suspended negotiations with ACDAC on March 21, 2014. No agreement was reached during these negotiations, which expired on April 10, 2014. On April 2014, ACDAC requested arbitration to settle the collective dispute. On October 5, 2015, ACDAC withdrew the list of demands and therefore, withdrew from the arbitration tribunal.

On June 10, 2015, in compliance with a judiciary order from the Colombian Constitutional Court (T-069/2015), Avianca paid the contingency we had, to all members of ACDAC and ACAV.

We cannot predict the duration of any labor dispute with our unions or the terms of our future collective bargaining agreements thereforethat, individually or in the aggregate, could adversely affect us. We have been affected by these types of instabilities in the past and we cannot accurately predict the impactassure you that these instabilities will not occur again.

Many of our employees are members of labor disputes onunions, and we may be adversely affected if we fail to maintain harmonious relationships with these labor unions, which could lead to strikes, work stoppages or other labor disruptions by employees. Given that the majority of our financial resultsoperations is in Colombia, we are highly and particularly sensitive to labor disruptions affecting the Colombian market.

In addition, our personnel costs may increase significantly as a result of our renegotiation of collective bargaining agreements. If we are not able to pass these increased costs onto our customers through inflation-based price increases, or operations.

We commenced negotiation sessions with the Workers (flight attendants, airport agents and instructors) Union of Trans American Airlines, S.A. on April 10, 2015. The resultsif we breach any of the negotiations with the Workers Union of Trans American Airlines, S.A.collective bargaining agreements we are party to, we may affect the negotiations with the members of the Colombian Association of Flight Attendants. Typically,be materially and adversely affected.

See “Business–Employees–Collective Bargaining Agreements” for further information regarding our collective bargaining agreements in Colombia, Peru and Mexico last two to five years. In addition, we signed an agreementrelations with the Pilot’s Union of Trans American Airlines S.A. on April 9, 2015, which will remain in place 3.5 years and we expect negotiations will resume in August 2017. The relations during this negotiation were carried out in very professional terms and no disruptions arose during these months. Because we provide an essential public service, strikes and work interruptions are forbidden by law in Colombia; however, a slow-down or stoppage or any prolonged dispute with our employees who are represented by any of these unions, or any other sizable number of our employees, could have an adverse impact on our operations. These risks are typically exacerbated during periods of renegotiation with the unions.

As of December 31, 2015, we had 5,112 individuals hired through nonprofit cooperative organizations. However, in 2010, the Colombian Congress passed Law 1429, which modified the legal regime of labor relationships for full-time employees in Colombia. As a consequence of these changes, we have been directly hiring all administrative personnel while continuing to use the cooperatives for services and maintenance personnel. Even though we believe we were and continue to be in compliance with applicable laws, individuals hired through cooperatives may potentially file claims against us in connection with alleged labor benefits earned during the time they were hired through the cooperatives. An adverse decision under these claims could force us to make substantial payments, which could adversely affect our financial condition.employees.

If we are unable to continueattract customers to successfully attract passengers to,our website and make direct ticket sales, on,our revenue would be adversely affected.

Direct ticket sales through our website, our sales and revenues would be negatively impacted.

Our direct e-commerce saleswhich represented 18.4%31.4% of our passenger revenue in 20152020 and, the proportion ofrepresent our sales through this channel has been growing in recent years. Aslowest cost distribution channel. Our website also serves as a result,platform to offer ancillary products to increase our revenue from non-ticket sources. Accordingly, it is increasingly important that we are able to attract customers to our website and encourage them to purchase tickets online. Our direct

We intend to continue working to increase sales through online channels, in particular through our website and our mobile app, as these sales are particularly importantmore cost-efficient and involve lower distribution costs than sales through travel agencies. In furtherance of this goal, we continue to our business because they do not involve sales commissions paid to third parties.

In order to win shopper preference we may make significant capital expenditures related to improve our website. These willwebsite and mobile app and generally increase our expenses and there is noonline presence; however, we cannot guarantee that these efforts and marketing campaigns will improve our online sales. If we are unable to process online sales, because of technological failures or cybersecurity attacks, itbe effective, which would damage our sales, revenues and potentially our reputation and customer relations.adversely affect us.

We may not be able to maintain or grow our ancillary revenues.revenue.

Our business strategy includes expandingcontinually growing our stream of passenger related revenue from our portfolio of ancillary products and services.services, which are part of our passenger related operating revenues and represented 6.3%, 4.8% and 4.0% of our total passenger revenue in 2020, 2019 and 2018, respectively. There can be no assurance that passengers will pay for additional ancillary products and services or that passengers will continue to choose to pay for the ancillary products and services we currently offer. Failure to maintain our non-ticket revenuesoffer, which could have a negative effect on our results of operations and financial condition.adversely affect us.

If we are unable to protect our intellectual property rights, specifically our trademarks and service marks, our ability to competetrade names, we could be negatively impacted.adversely affected.

We own the rights to certain trademarks and trade names used in connection with our business, including “Avianca” and “LifeMiles.LifeMiles.” We believe that our trademarks, trade names trademarks and other related intellectual property are important to the success of our business. We protect our intellectual property rights through a variety of methods, including, but not limited to, applying for and obtaining trademark protection in Colombia, Central America, the

United States and certain other countries throughout the world in whichwhere we operate our business.operate. Any violation of our intellectual property rights or refusal to grant record of such rights in foreign jurisdictions may result in having to devote our time and resourcesmeasures to protect these rights through litigation or otherwise, which could be expensive

and time consuming. As of the date of this annual report, our intellectual property rights, including the Avianca brand, are pledged to creditors. If we fail to adequately protect our intellectual property rights, for whatever reason, itwe could have an adverse impact on our operations and financial condition.be adversely affected.

We are exposed to increases in landing charges and other airport access fees and cannot be assuredAny condition that would prevent or delay our access to adequate facilities andairports or routes that are vital to our strategy, or our inability to maintain our existing landing rights necessary to achieve our expansion plans.and slots at reasonable costs, could materially and adversely affect us.

We must pay fees to airport operators for the use of their facilities. Passenger taxes and airport charges have increased in recent years, in some cases substantially. We cannot assure youConsistent with this trend, it is possible that the airports we userely on will not impose, or further increase, passenger taxes and airport chargescharges. To the extent we are unable to pass these costs onto our customers in the future. Any substantial increase in airport charges could have a material adverse impact on our resultsform of operations.

Moreover, some of the airports to whichincreased fares, we fly impose various restrictions, including limits on aircraft noise levels, limits on the number of average daily departures and curfews on runway use. In addition, we cannot assure you that the airports at which there are currently no such restrictions will not implement restrictions in the future or that, where such restrictions exist, they may not become more onerous. Such restrictions may limit our ability to continue to provide or to increase services at such airports.would be adversely affected.

Certain airports that we serve (or that we plan to serve in the future) are subject to capacity constraints and impose slot restrictions during certain periods of the day. In addition, weWe cannot assure you that we will be able to obtain a sufficient number of slots, gates and other facilities at airports to expandoperate in a manner consistent with our services in the manner in which we are proposing to do so.business strategy. It is also possible that airports not currently subject to capacity constraints may become so in the future.so. In addition, an airlinewe must use itsour slots on a regular and timely basis and, in some cases, comply with certain on-time performance requirements, or risk having those slots re-allocated to others.other airlines. Where slots or other airport resources are not available or their availability is restricted in some way,fashion, we may have to amendadjust our schedules, change routes or reduce aircraft utilization. If we are unable to obtain or maintain favorable take-off and landing authorizations, slots, gates or other facilities at certain high-density airports, especially our business, financial condition and results of operations couldhubs, we may be materially and adversely affected.

We are a holding company with no independent operations or assets, andThroughout the COVID-19 pandemic, several airports imposed slot restrictions which limited our ability to repay our debtoperate on an optimal level. In addition, due to the COVID-19 pandemic, the civil aviation authority is limiting airport capacity by reducing departures and pay dividends to holderslandings per hour. These measures if maintained, may adversely affect us.

Some of the ADSs is dependentairports to which we fly impose various other operational restrictions, including limits on cash flow generated byaircraft noise levels, limits on the number of average daily departures and curfews on runway use, and other airports may adopt similar restrictions, which may adversely affect our subsidiaries, which are subjectoperations.

Additionally, if we have a change of control, we may lose the right to limitations on their abilityuse certain routes we currently operate, or we may be required to make dividend payments to us.

We conduct no operations, and our only material asset is our equity interests inforfeit our operating subsidiaries. Accordingly, our ability to repay our indebtednesslicenses, either of which would materially and pay dividends to holders of the ADSs is dependent on the generation of cash flow by our subsidiaries and their ability to make such cash available to us, by dividend, debt repayment or otherwise. Our subsidiaries’ ability to generate sufficient cash from operations to make distributions to usadversely affect us. We cannot assure you there will depend upon their future operating performance, which will be affected by general economic, financial, competitive, legislative, regulatory, business and other factors beyond their control.

In addition, our subsidiaries may not be able to, or may not be permitted to, make distributions to us in order to enable us to make payments in respecta change of our indebtedness or to pay dividends. Restrictions in our subsidiaries’ debt instrumentscontrol if and under applicable law limit their ability to provide funds to us, and if our subsidiaries are not able to make funds available to us by dividend, debt repayment or otherwise,when we may not have sufficient funds to fulfill our obligations under our indebtedness or pay dividends to our shareholders, including holders of the ADSs. For example, our local bonds restrict Avianca S.A.’s ability to pay dividends prior to December 31, 2016 unless certain covenants are satisfied. As of December 31, 2015, Avianca S.A. was not meeting the ratio necessary to pay dividends to us under its local bonds.emerge from Chapter 11.

We may be liable for the potential under-funding of a pilot’spilots’ pension fund.

We are obligated to make contributions to a pilot’spilots’ pension fund for the Colombian Association of Civil Aviators known asLa Caja de Auxilios y de Prestaciones de la Asociación Colombiana de Aviadores Civiles (“CAXDAC”), or CAXDAC, on behalf of certain of our eligible pilots. The pensioners affiliated with CAXDAC include not only some of our current pilots and former pilots, but also pilots employed and formerly employed by other Colombian airlines. The assets that we have contributedOur contributions to CAXDAC are segregated into a separate account that is restricted for the payments of retirement benefits payments ofto our employees. The amountAmounts in the common CAXDAC fund used to pay the pensions may not be sufficient to cover all accrued pension liabilities since other Colombian airlines have gone bankrupt or have been liquidated and have failed to pay their ratable contributions to the pension fund. Although CAXDAC, as a pension fund manager, is the only entity obligated to pay retirement pensionsbenefits to those pensioners legally affiliated with CAXDAC, it is uncertain how the expected deficiency will ultimately be funded and whether or not pensioners and other third parties may bring actions against contributing airlines, including ourselves, seeking contributions to cover such deficiency, in which case we will be required to defend our position that we are not liable for this deficiency and face the uncertainty of judicial review. However, theOur obligation of pension contributionto make contributions to CAXDAC shallwill terminate at the timeonce we transfer the full value of actuarial calculation, which, under Colombian law, should occur no later thanby the end of 2023.

Risks Relating to the Airline Industry

The outbreak or the threat of an outbreak of a contagious disease has already and may further materially and adversely affect the airline industry.

Outbreaks of contagious diseases with epidemic or pandemic potential, such as the Ebola virus, the Middle East respiratory syndrome, Dengue fever, the bird flu virus, cholera, influenza and, most recently, COVID-19 can materially and adversely affect the airline industry isand our business. First, the disease may affect the health of our crew and operations personnel, impairing normal flight operations. Second, aircraft use may be affected by passengers with contagious diseases or by government measures to avoid the spread of contagious diseases, and may be grounded until the health and safety of passengers and crew can be guaranteed. Third, the disease has adversely affected and may further adversely affect demand for air travel, significantly affecting passenger flow and, consequently, us.

We operate in a highly competitive.competitive industry and actions by our competitors could adversely affect us.

We face intense competition throughout ouron domestic and international route networks, which can affectroutes from competing airlines, charter airlines and potential new entrants in our yieldsmarket and otherwise adversely impact our results of operations. Overall airline industry profit margins are low and industry earnings are volatile.loyalty program LifeMiles also faces competition. Airlines compete mainly in the areas of pricing, scheduling (frequency and flight times), on-time performance, on-board experience, frequent flyer programs and other services.

During 2013, 2014Each year, we may face increased competition from existing and 2015, respectively, domesticnew participants in the markets in which we operate. The air travel in Colombia, Peru and Ecuador accounted for approximately 26.7%, 27.7% and 39.4% of our passenger revenue and approximately 58.0%, 59.9% and 60.5% of our revenue passengers. As a result, our financial performancetransportation sector is highly sensitive to competitive conditions inprice discounting and the Colombian, Peruvianuse of aggressive pricing policies. Other factors, such as flight frequency, schedule availability, brand recognition and Ecuadorian domestic air travel markets. Our primary competitors inquality of offered services (such as loyalty programs, VIP airport lounges, in-flight entertainment and other amenities) also have a significant impact on market competitiveness. In addition, the Colombianbarriers to entering the domestic market are LATAM Airlines Group, VivaColombia, EasyFlyrelatively low and Satena. We may face significantly stronger domestic competitionwe cannot assure you that existing or new competitors in our markets will not offer lower prices, offer more attractive services or increase their route capacity in an effort to obtain greater market share.

Some of our competitors have larger customer bases and greater brand recognition in the future becausemarkets we serve outside of theseColombia, and most of our international competitors have significantly greater financial and newmarketing resources than we do. In addition, some of our competitors therefore, our prior resultsmay receive support from external sources, such as their national governments, which may be unavailable to us. Support may include, among others, subsidies, regulatory facilities, financial support or tax waivers. This support could place us at a competitive disadvantage and market share may not be indicative of future performance in the Colombian domestic market. Our primary competitors in the Peruvian domestic market are LATAM Airlines Group, Star Peru, LC Peru and Peruvian and in the Ecuadorian domestic market our primary competitors are LATAM Airlines Group and TAME. adversely affect us.

In addition to traditional competition among airline companies, we face competition from companies that provide ground transportation, especially in our domestic cargo and passenger business, as well as companies that provide sea transportation in relation to our cargo business. In addition, technology advancements may limit the desire for air travel. For example, video teleconferencing and other methods of electronic communication may reduce the need for in-person communication and add a new dimension of competition to the industry as travelers seek lower cost substitutes for air travel.

Furthermore, new competitors may target LifeMiles’ business partners and members or enter the loyalty marketing industry. We also compete withcannot provide assurance that an increase in competition faced by LifeMiles will not have an adverse effect on LifeMiles or, consequently, us. If we are unable to adjust rapidly to the changing nature of competition in our markets or if the Colombian loyalty marketing industry does not grow sufficiently to accommodate new participants, we could be adversely affected.

We expect to face increasing competition from low-cost carriers offering discounted fares.

Low-cost carrier business models have gained momentum in the Latin American aviation market, particularly as challenging macroeconomic conditions in Latin America persist and affect consumer purchasing power. The successes of VivaAir Group and Wingo in Colombia, GOL Linhas Aéreas and Azul in Brazil, Interjet, Viva Aerobus and Volaris in Mexico, JetSMART in Chile and Flybondi in Argentina are evidence of this trend.

Low-cost carriers’ operations are typically characterized by point-to-point route networks focused on the highest-demand city pairs, high aircraft utilization, single-class service and fewer in-flight amenities. Our business model is significantly different from that of low-cost carriers and is predicated on providing a numberlevel of large airlines that serve the same international routesservice that we fly, including, among others, Copa Airlines, LATAM Airlines Group, American Airlines, United Airlines, Iberia, Delta Air Lines, Aeroméxico, Interjet, Jet Blue Airways, Spirit Airlines, Aerolineas Argentinas, VECAconsider superior and VivaColombia. See “Item 4. Informationcharging higher prices for this service. However, as low-cost carriers continue to penetrate our home markets, this could result in significant and lasting downward pressure on the Company—Part B. Business Overview—Competition.” Somefares we charge, which could have a material adverse effect on us and compel us to reconsider our business model to adapt it to evolving passenger preferences.

We face increasing competition from other international airlines due to the continuing liberalization of our competitors, including American Airlines, United Airlinesrestrictions traditionally affecting airlines and LATAM Airlines Group, have larger customer bases and greater brand recognitionconsolidation in the markets we serve outsideindustry.

The global airline industry has been shifting to increasing acceptance of Colombia,liberalized and most of our international competitors have significantly greater financial and marketing resources than we do. In December 2015, members“open skies” air transport agreements between nations. “Open skies” agreements exist between the countries of the Schengen community eliminatedEuropean Union, and between Europe and the Schengen Visa requirements (which permits free travel without immigration checksUnited States. In Latin America, multilateral “open skies” agreements exist between participating European countries) for ColombianColombia, Ecuador and Peruvian citizens, increasing the passenger trafficBolivia and bilateral “open skies” agreements between each of these countries and therefore many European airlines entering into these markets are pressuringthe United States. These agreements serve to reduce market fares, such as KLM, Air Europa, TAP, Alitalia, British Airways and Iberia. In response to this situation, we have increased our frequencies from three to five per week(or, in the case of “open skies,” eliminate) restrictions on route Cali - Madridrights, designated carriers, aircraft capacity or flight frequencies and promote competitive pricing.

We expect that governmental authorities will continue to liberalize restrictions on international travel to and from fourcountries, which may involve, among other initiatives, the granting of new route rights and flights to sevencompeting airlines and an increase in the numbers of market participants. As a result of this liberalization, we could face substantial new competition, which may erode our pricing and market share and have a material adverse effect on us. For example, it is likely that the Colombian government will eventually liberalize the current restrictions on international travel to and from our Bogotá hub by, among other things, granting new route Bogotá - London. Airlines based in other countries may also receive subsidies, tax incentives or other state aid from their respective governments, which are not providedrights and flights to us by the governments in the countries in which we operate. The commencement of, or anycompeting airlines and generally promoting an increase in servicemarket participants on the routes we serveserve.

In addition, consolidation in the Latin American airline industry, including by existing or new competitors could negatively impact our operating results. Likewise, competitors’ service on routes that we are targetingmeans of joint business agreements between airlines and acquisitions, including, for expansionexample, Delta’s acquisition of 20% of LATAM Airlines Group (“LATAM”) in 2019, may make those expansion plans less attractive.

We must constantly react to changes in prices and services offered byallow our competitors to remain competitive. Theincrease their scale, diversity and financial strength. Consolidations in the airline industry is highly susceptibleand changes in international alliances are likely to price discounting, particularly because airlines incur very low marginal costs for providing service to passengers occupying otherwise unsold seats. Carriers use discount fares to stimulate traffic during periods of lower demand in order to generate cash flow and increase market share. Any lower fares offered by one airline are often matched by competing airlines, which often results in lower industry yields with little or no increase in traffic levels. Price competition among airlinesaffect the competitive landscape in the future could lead to lower fares or passenger traffic on some or allindustry and may result in the formation of our routes,airlines and alliances with increased financial resources, more extensive global networks and reduced cost structures than us, which could negatively impact our profitability. Such activity by other airlines could lead to reductions in the fares or passenger traffic on our routes, to the point where profitable operations could not be maintained. Due to our smaller sizematerially and financial resources compared to some of our international competitors, we may be less able to withstand aggressive marketing tactics or fare wars engaged in by or with our competitors should such events occur.adversely affect us.

Volatility in our fuel costs or disruptions in our fuel supply would materially and adversely affect our operating results.

Aircraft fuel costs constitute a significant portion of our total operating expenses, representing approximately 31.4%14.4%, 30.4%23.3% and 24.3%26.0%, respectively, of our operating expenses in the years ended December 31, 2013, 20142020, 2019 and 2015. Fuel costs2018. Historically, international and local fuel prices have been subject to wide price fluctuations as a result of increasesand, in demand andsome cases, sudden disruptions, in,based on geopolitical issues and other concerns about, global supply and demand as well as market speculation. Both the cost andFuel availability of fuel areis also subject to many economicperiods of market surplus and political factorsshortage and events occurring throughout the world that we can neither control nor accurately predict, such as politicalis affected by demand for both home heating oil and gasoline. Events resulting from prolonged instability in major oil-exporting countries in the Middle East Latin Americaor other oil-producing regions, or the suspension of production by any significant producer, may result in substantial price increases and/or make it difficult to obtain adequate supplies, which may adversely affect us. Natural disasters or other large unexpected disrupting events in regions that normally consume significant amounts of other energy sources could have a similar effect. We cannot predict the price and Africa. As a resultfuture availability of factors such as this, fuel costs continue to exhibit substantial volatility. If there are wide fluctuations in fuel costs in short periodswith any degree of time, we cannot assure you that we will have enough time to adaptcertainty, and respond to these scenarios.

Therefore, substantialsignificant increases in fuel costs would materially and adverselyprices may affect our operating results. Even though fuel prices decreased approximately 60% between June 2014results and June 2015, we are vulnerable to any future increases in fuel costs. otherwise harm our business.

We cannot assure you that fuel costs will not increase significantly, aboveand our hedging activities may not be sufficient to protect us from fuel price fluctuations, as they are limited in volume and duration and may carry counterparty risk. In addition, when fuel prices decrease, we may be exposed to losses on our hedge contracts, which can partially offset savings in fuel expenses. We may not be able to adjust our fares adequately or otherwise respond quickly to protect us from volatility in fuel costs, and our competitors may have better access and terms in satisfying their current levels, similarfuel needs. We maintained two fuel sources in Bogotá for the majority of 2020. From October 2019 to what occurredSeptember 2020, 80% of our fuel in 2010, when West Texas Intermediate, or WTI, crude prices, a benchmark widely used for crude oil prices thatBogotá was provided by Organización Terpel S.A. and the remainder by Puma Energy Colombia Combustibles S.A.S. As of October 2020, 100% of our fuel in Bogotá is measured in barrels and quoted in U.S. dollars, gradually increased and closed the year at approximately $91 per barrel andprovided by the end of 2011, prices had reached approximately $99 per barrel. Organización Terpel S.A.

Our aircraft fuel purchase agreements do not protect us against price increases or guarantee the availability of fuel. Additionally, somefuel and termination of our competitors may have more leverage than we do in obtaining fuel. We have and may continue to develop our corporate risk policy to protect against fuel prices volatility and due to the competitive nature of the airline industry, at times we have not been able to adequately increase our fares to offset the increases in fuel prices and we may not be able to do so in the future. When fuel prices fall, we are typically exposed to losses on our hedge contracts, which can partially offset savings in fuel cost expense that we experience in our operations. However, the hedge contracts andpurchase agreements we use do not completely protect us against price volatility, are limited in volume and duration and may carry counterparty risk. Under the fuel hedge contracts we may enter from time to time, counterparties to those contracts maywould require us to fund the margin associated with any loss position on the contracts if the price of crude oils falls below specified benchmarks. Meetingrenegotiate our obligations to fund these margin calls could adversely affect our liquidity. Similar to what happened by the end of 2014, WTI prices started to fall reaching average prices of $37.13 per barrel by the end of 2015. The average price of WTI on March 28, 2016 was $37.99. A decrease in fuel costs not only affects economies of countries where we operate, but also has a material adverse effect on our financial conditions and results, mainly because of the fuel hedges we previously negotiated.

Future fuel price increases, continued high fuel price volatility or fuel supply shortages mayin a market with a limited number of suppliers, which might result in a curtailment of scheduled services and could have a material adverse effecthigher costs for us. If we were unable to obtain fuel on our financial condition and results of operations.similar terms from alternative suppliers, we would be adversely affected. Our fuel risk in Colombia is intensified to

In addition, should

the extent that Ecopetrol S.A. (Colombia’s government-controlled oil company) experienceexperiences any disruption or slow-downslowdown in its fuel production or pumping capacity, particularly in Bogotá,capacity. In such event, we or our suppliers may be unable to obtain fuel or may be forced to pay significantly higher prices to do so.prices. This risk is heightened by the low oil storage levels that we understand are maintained by Ecopetrol S.A. and its distributors in Bogotá. We currently have an exclusive agreement with a single fuel distributor

Our business is highly regulated and changes in Bogotá, Organización Terpel S.A.,the regulatory environment in which we operate, including relating to safety assessments by regulators such as the FAA, or Terpel, pursuantany non-compliance on our part, may adversely affect us.

Our business is highly regulated and substantially depends upon the regulatory environment in the countries in which we operate. For example, price controls on fares may limit our ability to effectively apply customer segmentation profit maximization techniques, which Terpel supplied us with approximately 90.4%, 97.7%use passenger demand forecasts and 97.6%fare mix optimization, and adjust prices to reflect cost pressures. Government regulation may limit the scope of our fuel needs in Colombia for eachoperations and may impose significant costs on us. As of 2013, 2014 and 2015, respectively. During 2013, 2014 and 2015, respectively, it supplied approximately 36.8%, 41.0% and 43.4%December 31, 2020, 83% of our total fuel consumption.fleet was U.S.-registered. The U.S. Federal Aviation Administration (“FAA”) and the European Aviation Safety Agency (“EASA”) are our most significant foreign government regulators. The FAA from time to time issues directives and other regulations relating to the maintenance and operation of aircraft that require significant expenditures. Additional regulations applicable to our operations continue to be regularly implemented by various U.S. and European agencies, including the U.S. Transportation Safety Administration (“TSA”), the U.S. Drug Enforcement Agency and the EASA. We cannot predict or control any actions that the civil aviation and consumer protection authorities or other aviation regulators may take, which could include restricting our operations or imposing new and costly regulations.

Additionally, we may be affected by governmental safety assessments. For example, our ability to fly to the United States and the benefits of our strategic alliances or commercial relationships are dependent on the FAA’s continued favorable safety assessment of each of the countries in which we have hubs. The FAA periodically audits aviation regulatory authorities, and each country is given an International Aviation Safety Assessment (“IASA”) rating. The IASA rating of each of Colombia, El Salvador and Ecuador is currently “Category 1,” which means that each such country complies with the International Civil Aviation Organization (“ICAO”) safety requirements. As a result, we may continue our service from our hubs in these countries to the United States and take part in reciprocal code-sharing arrangements with U.S. carriers. However, any of these ratings may be downgraded for a variety of safety and other reasons and we have no control over compliance by the civil aviation authorities of these or other countries with international safety standards. In the event such arrangements werecase of a downgrade, we will not be able to terminate, we could be forcedoffer flights to renegotiate our fuel supply in a market with a limited number of suppliers, which might result in higher costs for us.

We expect to face increasing competition from low-cost carriers offering discounted fares.

Airlinesany new destinations in the United States or certify new aircraft for flights to the United States; in addition, our U.S. air carrier code share partners will be required to suspend placement of their codes on our flights. This could materially and Europe haveadversely affect our service to the United States and, consequently, us.

We are subject to international bilateral and multilateral air transport agreements in recent years faced substantialrelation to the grant and increasing competitive pressure from low-cost carriers offering discounted fares. The low-cost carriers’ operations are typically characterized by point-to-point route networks focusing on the highest-demand city pairs, high aircraft utilization, single-classexchange of air traffic rights between different countries and if governmental authorities deny permission to us to provide service to domestic and fewer in-flight amenities. As has been evidenced by the operations of competitors suchinternational destinations, we may be adversely affected.

Bilateral aviation agreements as Gol Linhas Aéreas Inteligentes, or Gol, in Brazil,well as local aviation approvals frequently involve political and other Latin American countries and several new low-cost carriersconsiderations beyond our control. Accordingly, a modification, denunciation of or withdrawal of any country in which have started servicewe operate from one or more bilateral agreements, or suspension or revocation of our permission to operate in Mexico, Colombia andcertain airports or destinations or the imposition of other markets, such as Interjet, Viva Aerobus, Volaris, EasyFly, VECA and VivaColombia, the low-cost carrier business model is gaining acceptance in the Latin American aviation industry. For example, in 2015, VivaColombia continued expanding its international operations with the new routes from Bogotá and Medellin to Miami. JetBlue Airways initiated operations between Bogotá and Fort Lauderdale, and Spirit Airlines, another U.S. low cost carrier, launched new routes between Houston, Texas and Central America. Low fuel costs have made it easier for these airlines to expand into our market.

Our business model is significantly different from that of low-cost carriers and is predicated on providing a level of service that we consider superior and charging higher prices for such service. As low-cost carriers continue to penetrate our home markets, theysanctions, could have a material adverse effect on our financial condition and results of operations; therefore, we may be forced to reconsider our business model and adapt it to evolving passenger preferences. In any event, we may face new and substantial competition from low-cost carriersus. A change in the futureadministration of current laws and regulations or the adoption of new laws and regulations in any of the countries in which could result in significant and lasting downward pressure on the fares we charge for flights on our routes. We must constantly react to changes in prices and services offered by our competitors to remain competitive. Price competition among airlines in the future could lead to lower fares or passenger traffic on some or all ofoperate that restricts our routes, which couldairports or operations may also materially and adversely affect our profitability.

us. We face increasing competition from other international airlines due to the continuing liberalization of restrictions traditionally affecting the global airline industry.

Over the last 25 years the global airline industry has been shifting to increasing acceptance of liberalized and “open skies” air transportcannot give you any assurance that existing bilateral agreements among nations. For example, “open skies” agreements currently exist among the countries of the European Union,in which we are based and between Europe and the United States. In Latin America, “open skies” agreements exist among Colombia, Ecuador, Peru

and Bolivia and among each of these countries and the United States, Chile, Panama, Venezuela and the countries of Central America. El Salvador also has an “open skies” policy. As a general matter, these liberalized or “open skies” air transport agreements serve to (i) reduce (or, in the case of “open skies,” eliminate) restrictions on route rights, designated carriers, aircraft capacity or flight frequencies and (ii) promote competitive pricing.

As a result of this continuing trend toward liberalized air transport agreements, a number of countries to which we fly, have been negotiating with eachand permits from local government to liberalize or provide more flexibility to itsand foreign governments, will continue.

Certain bilateral air transport agreements, including agreements with such countriesthe United States, the United Kingdom and to permit more flights toBrazil, require that we remain substantially owned and from each local country.effectively controlled by a national governmental entity or its nationals. We cannot assure you that each government’s political position will not changenational citizens, directly or that additional flights will not be granted when requested by carriers from any other country.

It is likely that the different governmentsindirectly, will continue to liberalizeown and control a majority of our capital stock indefinitely. For example, if for any reason Germán Efromovich, José Efromovich and/or Roberto Kriete, who each have citizenships in several countries and are the current restrictions on international travelbeneficial owners of nearly all of our common stock, cease to have substantial ownership of our capital stock, or the effective control of our management and from each country, among other things, granting newoperations ceases to be exercised by nationals, we may no longer be in compliance with certain bilateral agreements that include the substantial ownership and effective control requirement. Our route and landing rights in a number of important countries and, flightsconsequently, we may be adversely affected to competing airlines and generally promoting increased numbers of market participants on routes we serve. As a resultthe extent of such liberalization, we could face substantial new competition, which may erode our pricing and market share and have a material adverse effect on our consolidated financial position and consolidated results of operations. For example, the joint business agreement entered into between LATAM Airlines Group, American Airlines and IAG (British Airways and Iberia) allows them to expand their airlines networks by adding frequencies and capacity to markets between South America, North America and Europe, where we operate. The implementation of these commercial agreements are subject to authorization by the applicable authorities in the different countries where the airlines party to these agreements operate, a process that may take between 12 to 18 months.

However, Colombia and Peru have an air transportation political position based on reciprocity, especially for fifth freedom rights, which means a liberalizationnon-compliance. See “Item 4. Information on the services based on third and fourth freedom rights.Company—B. Business Overview—Regulation.”

We face increased competition from certain airlines that have recently been restructured or emerged from bankruptcy and further consolidation of the Latin American airline industry mayFailure to comply with applicable environmental regulations could adversely affect our business and results of operations.reputation.

In recent years, a number of air carriers have soughtThe airline industry is subject to reorganize in bankruptcy. The successful completion of reorganizations could present us with competitors with significantly lower operating costs derived from favorable labor, supplyincreasingly stringent global, regional, federal, state, local and financing contracts renegotiated underforeign laws, regulations and ordinances relating to the protection of the applicable bankruptcy laws. Inenvironment, including those relating to air emissions, noise levels, discharges to surface and subsurface waters, safe drinking water and the management of hazardous substances, oils and waste materials. Any non-compliance may subject us to administrative and criminal sanctions, in addition many air carriers involved in reorganizations have historically undertaken substantial fare discounting in order to maintain cash flowsthe obligation to repair or to pay damages caused to the environment and to enhance continued customer loyalty. Such fare discounting could further lower yields for all carriers, including us.third parties.

Further consolidationThe proliferation of the Latin American airline industry may increase competitionnational regulations and taxes on carbon dioxide emissions in the marketscountries in which we serve. For example, in 2015, three years after the merger between LAN Airlinesoperate, and TAM, the group announced a single commercial brand named LATAM Airlines Group, which is the largest airline in Latin America in termscompliance with environmental regulations generally, could increase our costs. Failure to comply with any environmental regulations and licensing requirements could adversely affect us, including by suspension or revocation of fleet size, passengers carried, and destinations served. As a result of the competitive environment, there may be further consolidation in the Latin American and global airline industry, whether by means of acquisitions, joint ventures, partnerships or strategic alliances. We cannot predict the effects of further consolidation on the industry. Furthermore, consolidation in the airline industry and changes in international alliances will continue to affect the competitive landscape in the industry and mayoperating authorizations. Remediation obligations can result in significant costs associated with the formationinvestigation and clean-up of airlines and alliances with increased financial resources, more extensive global networks and reduced cost structures.contaminated properties, as well as claims for damages initiated by affected parties.

Some of our competitors may receive external support which could negatively impact our competitive position.

Some of our competitors may receive support from external sources, such as their national governments, which may be unavailable to us. Support may include, among others, subsidies, regulatory facilities, financial aid or tax waivers. This support could place us at a competitive disadvantage and adversely affect our operations and financial performance.

TheBecause the airline industry’s financial performance is characterized by low profit margins, and high fixed costs and relatively elastic revenue, we may be unablecannot quickly respond to a shortfall in expected revenue or reduce our costs to compete effectively against otherwith airlines with greater financial resources or lower operating costs.

The airline industry is characterized generally by low profit margins and high fixed costs, primarily consisting ofcomprising wages and salaries of crew and other personnel, fuel costs and aircraft and engine lease payments and other financing costs related to aircraft equipment.equipment, headquarter facility and information technology system license costs. Revenues per flight are primarily driven by the number of passengers transported and fares, which may vary significantly depending on several factors which are generally outside of our control, including general economic conditions, weatherweather-related factors and our competitors’ pricing strategies. However, the operating expensescosts of flying an aircrafteach flight do not vary significantly with the number of passengers transported and, cannot be adjusted quickly to respond to changes in revenue andtherefore, a deficit in expected revenue levels. As a result, fluctuationsrelatively small change in the number of passengers, per flightfare pricing or in pricingtraffic mix could have a significant effect on our operating and financial results.

As a function of our fixed costs, we may (i) have limited ability to obtain additional financing, (ii) be required to dedicate a significant part of our cash flow to fixed costs resulting from aircraft lease and financing payments, and (iii) have a limited ability to plan for, or react to, changes in our business, the industry generally and overall macroeconomic conditions. In addition, volatility in global financial markets may make it difficult for us to obtain financing to manage our fixed costs on favorable terms or at all.

As a result of the foregoing, we may be unable to quickly adjust our fixed costs in response to changes in our revenue. A shortfall from expected revenue levels could have a material adverse effect on us.

We rely on maintaining a high daily aircraft utilization rate, which makes us vulnerable to delays.

We seek to maintain a high daily aircraft utilization rate (the number of hours we use our aircraft per day). High daily aircraft utilization allows us to generate more revenue from our aircraft and is achieved in part by reducing turnaround time at airports, so we can fly more hours on average in a day. Nevertheless, aircraft utilization is reduced by delays and cancellations arising from a number of different factors, many of which are beyond our control, including among others, air traffic and airport congestion, adverse weather conditions, security requirements, government imposed travel restrictions, unscheduled maintenance and delays by third-party service providers relating to matters such as fueling and ground handling. HighOn the other hand, high aircraft utilization also increases the risk that, if an aircraft falls behind schedule during a given day, it could remain behind schedule for several additional days. SuchThese delays could result in a disruptiondisrupt of our operating performance, leading to customer dissatisfaction due to delayed or cancelled flights and missed connections which could in turn adversely affect our reputation, business, financial condition and results of operations.

On February 3, 2014, we took preventative action to ground our fleet of ten Fokker 50 turboprop aircraft (including four that were inactive) following an engine malfunction in one of the Fokker 50 aircraft in Cali, Colombia. We have since replaced our entire fleet of Fokker 50s with ATR72s.us.

Terrorist attacks or hostilities could adversely affect the airline industry by decreasing demand and increasing costs.

TheAny terrorist attacks in the United States on September 11, 2001 had an adverse impact on the airline industry. Airline traffic in the United States fell dramatically after the attacks, while it decreased less severely in Latin America. Our revenue depends on the number of passengers traveling on our flights. Therefore, any future terrorist attacksattack or threat of attacks,attack, whether or not involving commercial aircraft, any increase in hostilities relating to reprisals against terrorist organizations, including an escalation of military involvement in the Middle East or otherwise, and any related economic impact could result in decreased passenger traffic and materially and negativelyadversely affect our business, financial condition and results of operations.us.

Following

For example, the 2001 terrorist attacks in the United States on September 11, 2001 materially and adversely affected the airline industry. Airline traffic in the United States fell dramatically and airlines have experienced increased costs resulting from additional security measures that may be made evenbecome more rigorous in the future. In addition to measures imposed by the U.S. Department of Homeland Security and the TSA, IATA and certain foreign governments have also begun to institute additional security measures at foreign airports we serve.rigorous. A substantial portion of the costs of these security measures is borne by the airlines and their passengers. Terrorist attacks against the airline industry have recently increased. On October 31, 2015, a Metrojet Airbus 321 was destroyed as a result of an in-flight explosion in a cargo hold. According to Egyptian authorities, the explosion was caused by an improvised explosive device placed by airport personnel in one of the cargo holds. On February 3, 2016, there was another explosion in a Daello Airlines flight climbing out of Mogadishu. Investigations suggest that the explosion was caused by explosives hidden in a laptop computer with the help of airport personnel. Security measures imposed by the U.S.passengers and, foreign governments not only after September 11, 2001, have increased our costs andtherefore, may adversely affect us and our financial results, and additional measures taken in the future may result in similar adverse effects. Over the past six months, citing increased terrorist threats, the governments of Peru and El Salvador have ordered the airline to increase the number of security personnel in its operations.profit margins.

Premiums for insurance against aircraft damage and liability to third parties increased substantially following the 2001 terrorist attacks, and insurers could reduce their coverage or increase their premiums even further in the event of additional terrorist attacks, hijackings, airline crashes or other events adversely affecting the airline industry abroad or in Latin America. In the future, certainindustry. Certain aviation insurance could become unaffordable, unavailable or available only with amounts of coverage that are insufficient to comply with the levels of insurance coverage required by aircraft lenders and lessors or applicable government regulations. While governments in other countries have agreed to indemnify airlines for liabilities that they might incur from terrorist attacks or provide low-cost insurance for terrorism risks, the Colombian government has not indicated any intention to provide similar benefits to us. Increases in the cost of insurance may result in both higher airline ticket prices and decreased demand for air travel generally, which could materially and negativelyadversely affect our business, financial condition and results of operations.