Not applicable.

Not applicable.

An investment in the American Depositary Shares (“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 believe as of the date of this annual report may materially affect us.

For purposes of this section, when we state that a risk, uncertainty or problem may, could, would or will have an “adverse effect” on us or “adversely affect” us, we mean that the risk, uncertainty or problem could have an adverse effect on our ability to emerge from Chapter 11 proceedings and implement a reorganization plan, as well as on our business, financial condition, results of operations, cash flow, prospects, 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

We are subject to the risks and uncertainties associated with our Chapter 11 proceedings.

As a consequence of our filing Chapter 11 petitions, our operations and our ability to develop and execute 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:

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Any delays in our Chapter 11 proceedings increase the risks of our inability to reorganize 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 relief under Chapter 11 and the related proceedings, we cannot accurately predict or quantify the ultimate impact that events that occur during our Chapter 11 proceedings may have on us and there is no certainty as to our ability to continue as a going concern.

Additionally, our Chapter 11 proceedings require us to seek exit 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 the liabilities that will be subject to our plan of reorganization. Even once a plan of reorganization is approved and implemented, we may be adversely affected by the possible reluctance of prospective lenders and other counterparties to do business with a company that has recently emerged from Chapter 11 proceedings.

We may not be able to obtain confirmation of a Chapter 11 plan of reorganization.

To emerge successfully from bankruptcy court protection as a viable entity, we must meet certain statutory requirements with respect to adequacy of disclosure regarding a plan of reorganization, solicit and obtain the requisite acceptances of our plan, 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 numerous 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 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 able to reorganize our business and what, if any, distributions holders of claims against us, including holders of the ADSs, would ultimately receive with respect to their claims. There can be no assurance 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.

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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 cash flow from operations, which depends largely on factors beyond our control relating to developments deriving from the 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 our expectations and assumptions depends on a number of factors, including but not limited to: (i) our ability to change substantially our capital structure, (ii) our ability to obtain adequate liquidity and access financing sources, (iii) our ability to maintain customers’ confidence in our viability as a going concern, (iv) our ability to retain 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.

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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.

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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 fleet, 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 be 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 payment obligations and 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 repays the amounts due under the United Loan Agreement, it could regain control of our 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

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selling the controlling interest in 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 Chapter 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 passenger 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 the date of this annual report, subject to regulatory approvals, consents and 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 other 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 in connection with these purchase obligations, which are subject to developments relating to our Chapter 11 proceedings.

Our leverage may impair our ability to obtain additional financing for working capital, capital expenditures, acquisitions or other important needs or to do so on acceptable terms. In addition, we may be required to direct a substantial portion of our cash flow to the payment of principal and interest on our indebtedness, which could impair our liquidity and reduce the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other important needs. Our leverage may also increase the possibility of an event of default under the financial and operating covenants contained in our debt instruments and limit our ability to adjust to rapidly changing conditions in the market or the airline industry, reducing our ability to withstand competitive pressures and making us more vulnerable to a downturn in general economic conditions or business than our competitors that are less leveraged.

Additionally, our debt and lease financing agreements contain restrictive covenants and events of default that impose significant operating and financial restrictions on us, including limitations on our ability to incur additional debt, create liens and make certain investments. As 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.

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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 internal 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 were at any time not in compliance with any 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 date 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 became aware that we were subject to U.S. jurisdiction for purposes of certain U.S. sanctions laws and regulations administered by the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of the Treasury as a result of 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 engaged outside counsel and identified that our regularly scheduled commercial passenger flights between cities in Central 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 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

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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 contracts 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 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 the date of this annual report, claims regarding defaults under our lease payment obligations and other covenants are subject to developments relating to our Chapter 11 proceedings.

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

As of December 31, 2020, our operating fleet had an average age of 8.72 years; our jet passenger operating fleet had an average age of 8.11 years; our cargo fleet had an average age of 17.45 years; and our turboprop operating fleet had an average age of 6.79 years. If our fleet ages and is not replaced or the warranties covering our fleet expire and are not renewed, we expect our maintenance expenses to increase significantly, both on an absolute basis and as a percentage of our operating expenses. Any significant increase in maintenance and repair expenses would 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 aircraft to be grounded during repair, would adversely affect our operation. We cannot assure you that we would succeed in obtaining all aircraft and parts 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 operations of certain of our aircraft, potentially for a prolonged period of time, and could adversely affect us.

We depend on our strategic alliances and our commercial partnerships, such as our Star Alliance membership, in many countries where we operate in order to carry out our strategy. We would be adversely affected if any of our strategic alliances or commercial relationships were to terminate.

In many of the jurisdictions we operate in, we have found it in our interest to maintain a number of alliances and other commercial partnerships. We depend on these alliances and commercial partnerships 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 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

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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 may 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.

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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 adversely 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 reduce costs by operating a simplified aircraft fleet. However, as a result of this strategy, we are increasingly reliant on a small group of suppliers—Airbus and Boeing—and are thus vulnerable to problems associated with these suppliers, including, among others, in relation to design defects, mechanical problems, contractual performance, adverse public perceptions and regulatory actions. Supplier concentration risks also extend to the engines that power our aircraft.

If any of Airbus or Boeing 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 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 simplified aircraft fleet. We cannot assure you that any replacement aircraft would have the same operating

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advantages as the Airbus or Boeing aircraft that we 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. We may also be adversely affected by the failure or inability of Airbus or Boeing or the manufacturers of our engines to provide sufficient parts or related support services on a timely basis.

We would be materially 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. Operation of our aircraft could be suspended or restricted by regulatory authorities in the event of any actual or perceived mechanical or design problems. We would also be adversely 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. Hidden 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 these types of events.

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

We are highly dependent on our hubs at Bogotá’s El Dorado International Airport and El Salvador’s International Airport and confront structural challenges at each of these airports.

We are highly dependent on our operations at our hubs in Bogotá and El Salvador, and will become increasingly dependent on our Bogotá hub as we streamline our network. Many of our routes operate through these hubs, which accounted for approximately 76% of our daily arrivals and departures in 2020 (with Bogotá 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, 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 risks we face in trying to improve our operations at our hub airports and at other airports where we operate. Airport-related challenges inconvenience passengers, reduce aircraft utilization and increase costs, all of which adversely affect us.

We are in the process of incorporating new information technology systems and distortions and other disruptions may occur during the implementation period.

We may 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 phasing-in. Accordingly, adjustments may be required during the phase-in period.

We cannot assure you that information technology failures will not occur as a result of the ongoing implementation of new systems. Challenges and delays in implementing new systems, as well as the possibility of human failure when dealing with new systems, could affect our ability to realize projected or expected cost savings and improve operating efficiency and customer satisfaction as anticipated. Additionally, any information technology failures could adversely affect how our customers perceive us and impede our ability to timely collect and report financial results in accordance with applicable laws or result in data losses.

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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 services, including for maintenance. We also have entered into agreements with third-party contractors to provide us with call center services, catering, ground handling and baggage handling and “below the wing” aircraft services. It is our general policy that agreements with suppliers and third-party contractors are subject to termination on short notice. In some cases, we would have to pay penalties for terminating contracts on short notice. Our suppliers and third-party contractors may also terminate agreements on short notice. Termination of these agreements or our inability to renew these agreements or to negotiate new agreements with other suppliers and third-party contractors at comparable rates could adversely affect us. Further, our reliance on suppliers and third-party contractors limits our control over the costs, efficiency, timeliness and quality of those supplies and services. We expect to remain dependent on suppliers and third-party contractors for the foreseeable future. In the context of our Chapter 11 proceedings, certain of our agreements with suppliers and third-party contractors may be rejected.

We may be materially and adversely affected in the event of an accident or major incident involving our aircraft or aircraft of the types we operate or if our aircraft are grounded for any reason.

An accident or major incident involving 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 lease agreements to carry liability insurance. We believe the coverage and conditions set forth in our liability insurance policies are in accordance with the practice for international airlines and comply with the requirements of the aviation authorities in the countries where we operate. However, the liability insurance coverage we maintain may not be adequate and we may be forced to bear substantial losses in the event of an accident or major incident. Our insurance premiums may also increase significantly. Moreover, any accident or major incident involving our aircraft, 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 air transportation generally, due to safety concerns or other problems, whether real or perceived, which would adversely affect us. Safety concerns relating to our aircraft may cause us to ground our aircraft and, because our fleet plan has been streamlined by reducing the number of aircraft and fleet types we operate, these groundings may affect us more than our competitors that operate a more diverse fleet.

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

We are required to comply with the drug trafficking laws of Colombia, the United States and the European Union, among other countries, and are subject to substantial government oversight in connection with the enforcement of these 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, 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, we cannot assure you that the counterparties with whom we do business will not be subject to or will comply with these regulations, in which case such counterparty might face severe sanctions and be unable to perform under their agreements with us.

We cannot assure you that we will succeed in complying at all times with these laws. In the event, that we fail to comply with any U.S. or other foreign international drug trafficking laws, we may be subject to severe sanctions, fines, seizures of our aircraft or the cancellation of our flights, any of which could materially and adversely 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

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require us to employ a large number of highly-skilled personnel, including pilots, maintenance technicians and other operating personnel. In some of the countries in which we operate, there is a shortage of qualified pilots and maintenance technicians or other operating personnel we have faced turnover of skilled employees, many of whom have left us to work in countries where compensation is higher, requiring us to attract new skilled employees.

Should the turnover of skilled employees (particularly pilots and maintenance technicians) increase, our training expenses would increase. We cannot assure you that we will be able to recruit, train and retain the managers, pilots, maintenance technicians and other operating employees that we need to continue our operations or replace departing employees, which could adversely affect us.

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

We operate in a labor-intensive industry that is subject to the effects of instabilities in the labor market, including strikes, work stoppages, protests, lawsuits and changes in employment regulations, increases in wages, controversies regarding salary and labor allowances and the conditions of collective bargaining agreements that, individually or in the aggregate, could adversely affect us. We have been affected by these types of instabilities in the past and we cannot assure you that these instabilities will not occur again.

Many of our employees are members of labor unions, 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 operations 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 if we breach any of the collective bargaining agreements we are party to, we may be materially and adversely affected.

See “Business–Employees–Collective Bargaining Agreements” for further information regarding our collective bargaining agreements and relations with employees.

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

Direct ticket sales through our website, which represented 31.4% of our passenger revenue in 2020 and, represent our lowest cost distribution channel. Our website also serves as a 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.

We intend to continue working to increase sales through online channels, in particular through our website and our mobile app, as these sales are more cost-efficient and involve lower distribution costs than sales through travel agencies. In furtherance of this goal, we continue to make significant capital expenditures to improve our website and mobile app and generally increase our online presence; however, we cannot guarantee these efforts and marketing campaigns will be effective, which would adversely affect us.

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

Our business strategy includes continually growing our stream of passenger related revenue from our portfolio of ancillary products and 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, which could adversely affect us.

If we are unable to protect our intellectual property rights, specifically our trademarks and trade names, we could be adversely affected.

We own the rights to certain trademarks and trade names used in connection with our business, including “Avianca” and “LifeMiles.” We believe that our trademarks, trade names 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

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United States and certain other countries where we operate. Any violation of our intellectual property rights or refusal to grant record of such rights in foreign jurisdictions may result in measures 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, we could be adversely affected.

Any condition that would prevent or delay our access to airports or routes that are vital to our strategy, or our inability to maintain our existing landing rights 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. Consistent with this trend, it is possible that the airports we rely on will impose, or further increase, passenger taxes and airport charges. To the extent we are unable to pass these costs onto our customers in the form of increased fares, we would be adversely affected.

Certain airports that we serve are subject to capacity constraints and impose slot restrictions during certain periods of the day. We cannot assure you that we will be able to obtain a sufficient number of slots, gates and other facilities at airports to operate in a manner consistent with our business strategy. It is also possible that airports not currently subject to capacity constraints may become so. In addition, we must use our 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 other airlines. Where slots or other airport resources are not available or their availability is restricted in some fashion, we may have to adjust 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 hubs, we may be materially and adversely affected.

Throughout the COVID-19 pandemic, several airports imposed slot restrictions which limited our ability to operate on an optimal level. In addition, due to the COVID-19 pandemic, the civil aviation authority is limiting airport capacity by reducing departures and landings per hour. These measures if maintained, may adversely affect us.

Some of the airports to which we fly impose various other operational restrictions, including limits on aircraft 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 operations.

Additionally, if we have a change of control, we may lose the right to use certain routes we currently operate, or we may be required to forfeit our operating licenses, either of which would materially and adversely affect us. We cannot assure you there will not be a change of control if and when we emerge from Chapter 11.

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

We are obligated to make contributions to a pilots’ pension fund for the Colombian Association of Civil Aviators known as La Caja de Auxilios y de Prestaciones de la Asociación Colombiana de Aviadores Civiles (“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. Our contributions to CAXDAC are segregated into a separate account that is restricted for the payments of retirement benefits to our employees. Amounts in the common CAXDAC fund used to pay 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 manager, is the only entity obligated to pay retirement benefits 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. Our obligation to make contributions to CAXDAC will terminate once we transfer the full value of actuarial calculation, which, under Colombian law, should occur by the end of 2023.

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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 and 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 industry and actions by our competitors could adversely affect us.

We face intense competition on domestic and international routes from competing airlines, charter airlines and potential new entrants in our market and our 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.

Each year, we may face increased competition from existing and new participants in the markets in which we operate. The air transportation sector is highly sensitive to price discounting and the use of aggressive pricing policies. Other factors, such as flight frequency, schedule availability, brand recognition and quality 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 barriers to entering the domestic market are relatively low and we 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 markets we serve outside of Colombia, and most of our international competitors have significantly greater financial and marketing resources than we do. In addition, 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 support or tax waivers. This support could place us at a competitive disadvantage and 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 cannot 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 level of service that we consider superior and charging 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 fares 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.

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We face increasing competition from other international airlines due to the continuing liberalization of restrictions traditionally affecting airlines and consolidation in the industry.

The global airline industry has been shifting to increasing acceptance of liberalized and “open skies” air transport agreements between nations. “Open skies” agreements exist between the countries of the European Union, and between Europe and the United States. In Latin America, multilateral “open skies” agreements exist between Colombia, Ecuador and Bolivia and bilateral “open skies” agreements between each of these countries and the United States. These agreements serve to reduce (or, in the case of “open skies,” eliminate) restrictions on route rights, 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 countries, which may involve, among other initiatives, the granting of new route rights and flights to competing 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 rights and flights to competing airlines and generally promoting an increase in market participants on the routes we serve.

In addition, consolidation in the Latin American airline industry, including by means of joint business agreements between airlines and acquisitions, including, for example, Delta’s acquisition of 20% of LATAM Airlines Group (“LATAM”) in 2019, may allow our competitors to increase their scale, diversity and financial strength. Consolidations in the airline industry and changes in international alliances are likely to affect the competitive landscape in the industry and may result in the formation of airlines and alliances with increased financial resources, more extensive global networks and reduced cost structures than us, which could materially and 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 14.4%, 23.3% and 26.0%, respectively, of our operating expenses in 2020, 2019 and 2018. Historically, international and local fuel prices have been subject to wide price fluctuations and, in some cases, sudden disruptions, based on geopolitical issues and supply and demand as well as market speculation. Fuel availability is also subject to periods of market surplus and shortage and is affected by demand for both home heating oil and gasoline. Events resulting from prolonged instability in the Middle East or 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 future availability of fuel with any degree of certainty, and significant increases in fuel prices may affect our operating results and otherwise harm our business.

We cannot assure you that fuel costs will not increase significantly, and 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 fuel needs. We maintained two fuel sources in Bogotá for the majority of 2020. From October 2019 to September 2020, 80% of our fuel in Bogotá 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 provided by Organización Terpel S.A.

Our aircraft fuel purchase agreements do not protect us against price increases or guarantee the availability of fuel and termination of our fuel purchase agreements would require us to renegotiate our fuel supply in a market with a limited number of suppliers, which might result in higher costs for us. If we were unable to obtain fuel on similar terms from alternative suppliers, we would be adversely affected. Our fuel risk in Colombia is intensified to

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the extent that Ecopetrol S.A. (Colombia’s government-controlled oil company) experiences any disruption or slowdown in its fuel production or pumping capacity. In such event, we or our suppliers may be unable to obtain fuel or may be forced to pay significantly higher 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.

Our business is highly regulated and changes in the regulatory environment in which we operate, including relating to safety assessments by regulators such as the FAA, or any 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 use passenger demand forecasts and fare mix optimization, and adjust prices to reflect cost pressures. Government regulation may limit the scope of our operations and may impose significant costs on us. As of December 31, 2020, 83% of our total 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 case of a downgrade, we will not be able to offer flights to any 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 adversely affect our service to the United States and, consequently, us.

We are subject to international bilateral and multilateral air transport agreements in relation to the grant and exchange of air traffic rights between different countries and if governmental authorities deny permission to us to provide service to domestic and international destinations, we may be adversely affected.

Bilateral aviation agreements as well as local aviation approvals frequently involve political and other considerations beyond our control. Accordingly, a modification, denunciation of or withdrawal of any country in which we operate from one or more bilateral agreements, or suspension or revocation of our permission to operate in certain airports or destinations or the imposition of other sanctions, could have a material adverse effect on us. 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 routes, airports or operations may also materially and adversely affect us. 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.

Certain bilateral air transport agreements, including agreements with the United States, the United Kingdom and Brazil, require 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 citizenships in several countries and are the beneficial 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 operations 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, consequently, we may be adversely affected to the extent of such non-compliance. See “Item 4. Information on the Company—B. Business Overview—Regulation.”

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

The airline industry is subject to increasingly stringent global, regional, federal, state, local and foreign laws, regulations and ordinances relating to the protection of the environment, 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 to the obligation to repair or to pay damages caused to the environment and third parties.

The proliferation of national regulations and taxes on carbon dioxide emissions in the countries in which we operate, and compliance 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 operating authorizations. Remediation obligations can result in significant costs associated with the investigation and clean-up of contaminated properties, as well as claims for damages initiated by affected parties.

Because the airline industry’s financial performance is characterized by low profit margins, high fixed costs and relatively elastic revenue, we cannot quickly respond to a shortfall in expected revenue or reduce our costs to compete effectively with airlines with greater financial resources or lower operating costs.

The airline industry is characterized generally by low profit margins and high fixed costs, primarily comprising wages and salaries of crew and other personnel, fuel costs and aircraft and engine lease payments and other financing costs related to aircraft 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, weather-related factors and our competitors’ pricing strategies. However, the operating costs of each flight do not vary significantly and, therefore, a relatively small change in the number of passengers, fare pricing or traffic 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 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. On the other hand, high aircraft utilization increases the risk that, if an aircraft falls behind schedule during a given day, it could remain behind schedule for several additional days. These delays could disrupt of our operating performance, leading to customer dissatisfaction due to delayed or cancelled flights and missed connections which could in turn adversely affect us.

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

Any terrorist attack or threat of 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 adversely affect us.

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For example, the 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 experienced increased costs resulting from additional security measures that may become more rigorous. A substantial portion of the costs of these security measures is borne by the airlines and their passengers and, therefore, may adversely affect our 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. 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 adversely affect us.

Risks Relating to Colombia, Ecuador, Central America and Other Countries and Regions in Which We Operate

Our performance is heavily dependent on economic and political conditions in the countries in which we operate.

Passenger demand is heavily cyclical and highly dependent on global and local economic growth, economic and political expectations and foreign exchange rate variations. A significant portion of our revenue derives from discretionary travel and leisure travel, which are especially sensitive to economic downturns. Additionally, any perceived downturn in the economic conditions in the Andean region or Central America could adversely affect our ability to obtain financing to meet our future capital needs in international capital markets. Changes in economic or other governmental policies, including relating to interest rates, exchange rates, exchange controls, inflation rates, taxation, banking, labor and pension funds, regulatory, legal or administrative practices, expropriation measures, political instability or other economic or political developments in the countries in which we operate could materially and adversely affect us. The governments of Colombia, Ecuador and Central America have historically exercised substantial influence over their respective economies, and their policies are likely to continue to have a significant effect on companies operating in these countries, including us. We cannot predict what policies the governments in these countries will adopt and consequently cannot assure you that future developments in government policies or in the economies of these countries will not adversely affect us.

Rates of inflation in the countries in which we operate have historically been high, and we cannot assure you inflation will not return to high levels. Inflationary pressures may adversely affect our ability to access foreign financial markets, leading to adverse effects on our capital expenditure plans. In addition, inflationary pressures may reduce consumers’ purchasing power or lead governments to institute certain anti-inflationary policies, such as increased interest rates. Inflationary pressures may adversely affect us.

Our performance is heavily dependent on economic and political conditions in Colombia.

Our performance is heavily dependent on economic and political conditions in Colombia, as our operations in Colombia represented 39.2% of our total revenue in 2020. Economic growth or contractions, inflation, changes in law, regulation, policy or future judicial rulings and interpretations of policies involving exchange controls and other matters such as (but not limited to) currency depreciation, inflation, interest rates, taxation, banking laws and regulations and other political or economic developments in or affecting Colombia may affect the overall business environment and may, in turn, adversely affect us.

Colombia’s central government fiscal deficit and growing public debt could adversely affect the Colombian economy. Colombian’s fiscal deficit was 8.9% of gross domestic product (“GDP”) in 2020, 2.4% of GDP in 2019 and 2.4% of GDP in 2018. According to the projections published in December 2020 by the Ministry of Finance and Public Credit, the Colombian government expected a fiscal deficit of 6.6% of GDP for the year 2021. The Colombian government frequently intervenes in Colombia’s economy and from time to time makes significant changes in monetary, fiscal and regulatory policy. President Iván Duque Márquez, who took office in August 2018, inherited high government spending levels, and measures to meet fiscal targets led to protests around the country in

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late 2019 and early 2020, paralyzing activities in the main cities in Colombia for days. We may be adversely affected by changes in government or fiscal policies, and other political, diplomatic, social and economic developments that may affect Colombia. We cannot predict what policies will be adopted by the Colombian government and whether those policies would adversely affect the Colombian economy and, consequently, us.

In November 2020, Fitch Ratings (“Fitch”) affirmed Colombia’s rating outlook as negative as a result of the government’s long track record of conservative macroeconomic policies that have underpinned macroeconomic and financial stability. The negative outlook reflects downside risks to the economic growth outlook and uncertainties about the capacity of the government policy response to decisively cut deficits and stabilize and eventually lower debt in the coming years, following the sharp rise in general government debt burden as a result of the COVID-19 pandemic. In April 2021, S&P affirmed Colombia’s foreign currency retting as “BBB-.” In December 2020, Moody’s Corporation (“Moody’s”) downgraded Colombia’s rating outlook from stable to negative.

Any further downgrade of Colombia’s credit rating could adversely affect the Colombian economy and us. In 2017 and 2019, tax reforms were implemented, which included raising the VAT rate from 16% to 19%, increasing the withholding income tax rate for foreign providers from 15% to 20% and introducing further taxation in the context of the indirect transfer of shares of Colombian entities. As consequence of COVID–19, the Colombian Government implemented relief measures for tax purposes, such as reduction of VAT rate from 19% to 5% for passenger air transport until December 31, 2022, extension of due dates for submitting and paying taxes, possibility of making payment agreements for tax due with the tax authorities with special interest rate, among others.

The Colombian government and the Central Bank may seek to implement new policies aimed at controlling further fluctuation of the Colombian peso against the U.S. Dollar and fostering domestic price stability. The Central Bank may impose certain mandatory deposit requirements in connection with foreign-currency denominated loans obtained by Colombian residents, including us. Although there is currently no deposit requirement, we cannot predict or control actions by the Central Bank in respect of deposit requirements. The use of such measures by the Central Bank may be a disincentive for us to obtain loans denominated in a foreign currency. The U.S. dollar/Colombian peso exchange rate was COP 3,432.50 per $1.00, COP 3,277.14 per $1.00 and COP 3,249.75 per $1.00 as of December 31, 2020, 2019 and 2018. We cannot assure you that measures adopted by the Colombian government and the Central Bank will suffice to control this instability or that the Colombian peso will not depreciate or appreciate relative to other currencies.

Our performance is heavily dependent on economic and political conditions in El Salvador.

El Salvador has a political history marked by long periods of civil unrest and military rule. From 1979 to 1991, El Salvador was involved in guerrilla activities, which ended with a peace agreement signed in January 1992. The Nationalist Republican Alliance Party (“ARENA”) controlled the presidency from 1989 to 2009, at which time the Farabundo Martí National Liberation Front (“FMLN”), a former guerrilla organization now turned into a political party, won the presidential elections with Mauricio Funes. Salvador Sánchez Cerén, also a member of the FMLN, was elected president by a narrow margin, beginning his term in June 2014. The FMLN ruled continuously for 10 years.

In June 2019, Nayib Armando Bukele Ortez, a former member of the FMLN until his removal, assumed the presidency. He is the first president since the end of the civil war who is not a member of ARENA or FMLN. He faces challenges relating to national security, primarily from gang-related crimes.

In February 2020, President Bukele initiated a political crisis when he instructed the military to march into parliament to demand a loan of $109 million to address national security.

El Salvador’s unemployment and poverty rates remain high. Despite reforms and initiatives, El Salvador ranks among the ten poorest countries in Latin America and suffers from deep income inequality. We cannot assure you that El Salvador will not face political, economic or social problems, and we may be seriously affected by these problems. El Salvador’s GDP contracted 8.6% in 2020 and grew 2.4% in each of 2019 and 2018, according to the Central Reserve Bank, which estimates that GDP growth will be 4.7% in 2021. Operating revenues generated by our operation to and from El Salvador (domestic and international) for 2020 and 2019 was $145.8 million and $ 530.8 million respectively, which corresponds to 17.4% and 16.1% of Avianca Holding’s revenue.

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Our performance is heavily dependent on economic and political conditions in Ecuador.

The Ecuadorian economy is heavily dependent on the oil industry and global fluctuations in oil prices. While Ecuador’s GDP contracted 7.5% in 2020 and did not grow in 2019 and grew 1.3% in 2018, it faces an extreme poverty level estimated at 14.9% in 2020, according to the Ecuadorian National Center of Statistics. Ecuadorian exports, denominated in dollars, have lost competitiveness due to the currency depreciation of other Latin American export economies, leaving Ecuador’s economy more dependent on internal demand, which is adversely affected by poverty levels and unemployment rates.

Lenin Moreno was elected president in April 2017, representing the first change in administration since January 2007.

President Moreno has presented initiatives with the goal of reducing sovereign debt by privatizing certain state-owned companies and seeking new financings to service existing debt. He has faced growing civil discontent and has been pushed to withdraw certain of his policies in order to prevent further civil uprising. Operating revenues generated by our operation to and from to Ecuador (domestic and international) for 2020 and 2019 was $40.5 million and $176.4 million respectively, which corresponds to 4.8% and 53% of Avianca Holding’s revenue.

Developments and the perception of risk in other countries, especially emerging market countries, may adversely affect the market price of many Latin American securities including the ADSs.

The market value of securities issued by companies with operations in the Andean region and Central America may be affected to varying degrees by economic, political and market conditions in other countries, including other Latin American and emerging market countries. Although macroeconomic conditions in Latin American and other emerging market countries may differ significantly from macroeconomic conditions in Colombia and the other countries in which we operate, investors’ reactions to developments in these other countries may have an adverse effect on the market values of our securities. Further, crises in world financial markets, such as in 2008, as well as global economic challenges as of the date of this annual report deriving from the outbreak of the coronavirus and government measures to contain it, could affect investors’ views of securities issued by companies that operate in emerging markets. These developments could also make it more difficult for us and our subsidiaries to access the capital markets and finance our operations on acceptable terms, or at all.

Natural disasters in the countries in which we operate could disrupt our operations and adversely affect us.

We are exposed to natural disasters in each of the countries in which we operate, such as earthquakes, volcanic eruptions, tornadoes, tropical storms, lightning and hurricanes. For example, heavy rains in Colombia sometimes result in severe flooding and mudslides. El Salvador and Peru have experienced significant earthquakes. Moreover, the Central American isthmus, in particular El Salvador, Costa Rica, Guatemala and Nicaragua, is home to one of the world’s largest concentrations of active volcanos. Colombia has also experienced significant volcanic activity, affecting important cities covered by our domestic operations. Volcanic ash clouds not only affect airport operations, but also the route conditions of flights operating near the affected zone.

In the event of a natural disaster, there is a risk of damage to our airport hubs and other facilities, which could have a material adverse effect on our operations, particularly if such an occurrence affects computer-based data processing, transmission, storage and retrieval systems or destroys customer or other data. In any such event, our property damage and business interruption insurance might not be sufficient to fully offset our losses, which could adversely affect us. In addition, if a significant number of our employees and senior managers were unavailable because of a natural disaster, our ability to conduct our businesses could be compromised.

Fluctuations in foreign exchange rates and restrictions on currency exchange could adversely affect us.

The currency used by us is the U.S. dollar in terms of setting prices for our services and presenting our financial statements. We sell most of our services in U.S. dollars or prices equivalent to the U.S. dollar, and a large part of our expenses are also denominated in U.S. dollars or equivalents to the U.S. dollar, particularly fuel costs, aircraft leases, insurance and aircraft components and accessories.

In 2020, 70.1% of our total operating costs and expenses and 16.8% of our total operating revenue were denominated in, or linked to, U.S. dollars. The remainder of our expenses and revenue were denominated in currencies of the countries in which we operate, of which the most significant is the Colombian peso. Changes in the exchange rate between the Colombian peso and the U.S. dollar or other currencies in the countries in which we

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operate may adversely affect us. In particular, when our non-U.S. dollar-denominated revenue exceeds our non-U.S. dollar-denominated expenses, the depreciation of non-U.S. currencies against the U.S. dollar could have an adverse effect on our results because these amounts will convert into less U.S. dollars. We operate in numerous countries and face the risk of variation in foreign currency exchange rates against the U.S. dollar or between the currencies of these various countries.

In addition, a relevant portion of our expenses and liabilities are denominated in Colombian pesos. At times when the Colombian peso appreciates against the U.S. dollar, the value of these expenses and liabilities will increase in U.S. dollar terms, resulting in an increase in our non-operating expenses. Our $46.5 million currency exchange loss in 2020 was principally the result of exchange rate variations in the currencies of Colombia, Argentina and Brazil and we remain subject to exchange rate variations that may adversely affect us.

Variations in interest rates may adversely affect us.

We are exposed to the risk of interest rate variations. Our Colombian peso-denominated debt is mainly exposed to variations in long-term interest rates and the Colombian 90-day deposit rate for commercial banks (establecimientos bancarios), financial corporations (corporaciones financieras) and financing companies (companies de financiamiento), the banking benchmark IBR or the fixed term deposit rate DTF, as published by the Colombian Central Bank. Our non-Colombian peso-denominated debt is mainly exposed to variations in the London Interbank Offer Rate (“LIBOR”). Any increase in inflation or other macroeconomic pressures may lead to increases in these rates. As of December 31, 2020, we had $2,130.9 million in aggregate principal amount of variable-rate debt.

Increases in the above-mentioned rates may result in higher debt service payments under our loans, and we may not be able to adjust the prices we charge to offset the impact of these increases. If we are unable to adequately adjust our prices, our revenue might not be sufficient to offset the increased payments due under our loans and this would adversely affect us.

The U.K. Financial Conduct Authority announced in July 2017 that it intends to no longer compel banks to submit rates for the calculation of the London interbank offered rate, or LIBOR, after 2021. To mitigate any possible impact, various regulators have proposed alternative reference rates. As of December 31, 2020, we had $181.3 million of LIBOR-indexed variable rate leases. We cannot predict the effect of any discontinuation or replacement of the LIBOR at this time and, consequently, we cannot assure you that these changes will not have an adverse effect on us. In the context of our Chapter 11 proceedings, we will evaluate possible amendments to certain LIBOR-indexed financing agreements.

Risks Relating to the ADSs and our Preferred Shares

Because our post-bankruptcy capital structure is yet to be determined, and any changes to our capital structure may have a material adverse effect on holders of the ADSs or our preferred shares, trading in the ADSs or our preferred shares during the pendency of our Chapter 11 proceedings is highly speculative and poses substantial risks.

Our post-bankruptcy capital structure will be set pursuant to a reorganization plan that requires approval by the bankruptcy court. The reorganization of our capital structure may include exchanges of new equity securities for existing equity securities or of debt securities for equity securities, which would dilute any value of our existing equity securities, or may provide for all existing equity interests in us to be extinguished. In this case, amounts invested by holders of the ADSs or our preferred shares will not be recoverable and these securities will have no value.

As a result of our Chapter 11 proceedings, the New York Stock Exchange (the “NYSE”) applied to the SEC on May 27, 2020 in order to delist the ADSs. As of the date of this annual report, the ADSs are traded in the over-the-counter market, which is a less liquid market. There can be no assurance that the ADSs will continue to trade in the over-the-counter market or that any public market for the ADSs will exist in the future, whether broker-dealers will continue to provide public quotes of the ADSs, whether the trading volume of the ADSs will be sufficient to provide for an efficient trading market, whether quotes for the ADSs may be blocked in the future or that we will be able to relist the ADSs on a securities exchange.

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Later, on May 22, 2020, the BVC notified the Company that trading of its preferred stock (BVC: PFAVH), will be conducted by means of auctions starting on May 26, 2020. Pursuant to the BVC’s notice, the decision was adopted by its Equity Technical Committee due to: (i) Avianca’s voluntary filing for protection under Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York; (ii) the New York Stock Exchange’s (“NYSE”) decision to commence the delisting process of Avianca’s ADRs; (iii) the fact that, as a result of (i) and (ii) above, the price of Avianca’s shares on the BVC has been subject to increased volatility; (iv) the existence of a percentage of unsatisfied offers in view of the number of shares currently in circulation; and (v) the fact that instruments subject to trading by auction there are no applicable ranges of prices for the placing of trades, which allows for a more efficient price formation process under the current circumstances. Market participants and investors should note, that pursuant to the regulations of the BVC auction system, trades can only be registered during a specific auction period, and that any resulting transactions must be executed as provided by BVC regulations.

Trading prices of the ADSs or our preferred shares bear no relationship to the actual recovery, if any, by their holders in the context of our Chapter 11 proceedings. Due to these and other risks described in this annual report, trading in the ADSs or our preferred shares during the pendency of our Chapter 11 proceedings poses substantial risks and we urge extreme caution with respect to existing and future investments in these securities.

BRW, Kingsland and United (if it has issued a United Approval Notice), have veto power over certain strategic and operational transactions, and their interests may differ significantly from the interests of our other shareholders and holders of the ADSs.

We, our controlling shareholders, BRW, Kingsland and United are parties to the Amended and Restated Joint Action Agreement and the Share Rights Agreement. These agreements give BRW, Kingsland as independent third party and United (if it has issued a United Approval Notice) veto power over significant strategic and operational transactions, including, among others:

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In addition, pursuant to the Share Rights Agreement, if United notifies the other parties thereto that (i) United has determined that its exercise of any or all of the rights that have been delegated to the Independent Third Party by Kingsland can be exercised by United or its designee without such exercise constituting “control” within the meaning of such term within any of United’s collective bargaining agreements or other material agreements, or (b) United is otherwise prepared to exercise any or all of such rights (which is referred to herein as a United Approval Notice), then United or its designee can assume some or all of the rights given to the Independent Third Party. Such United Approval Notice has not been issued as of the date of this annual report.

Furthermore, if all of the obligations under the United Loan are repaid in full, the Amended and Restated Joint Action Agreement provides that there will be certain changes to the veto rights described above.

As a result of the foregoing veto rights, BRW, the Independent Third Party and United (if it has issued a United Approval Notice) can prevent us from taking strategic and other actions that may be in your best interests, including transactions that may enhance the long-term value of the ADSs and/or provide you with an opportunity to realize a premium on your investment in the ADSs.

Furthermore, we cannot assure you that the interests of BRW, the Independent Third Party and United (if it has issued a United Approval Notice) will be aligned with those of ADSs holders, and cannot give you any assurance that BRW, the Independent Third Party and United (if it has issued a United Approval Notice) will exercise their respective rights under the Amended and Restated Joint Action Agreement in a manner that is favorable to your interests as an ADS holder. In addition, any potential change in our control structure as a result of the United Loan may cause corresponding changes in relation to management and control decisions and could alter our controlling shareholders’ objectives in a manner that is not favorable to holders of the ADSs (see “—Risks Relating to our Business—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 if United has commenced the exercise of remedies against BRW and its holding company, BRW Holding.”

Our controlling shareholders can direct our affairs, and their interests may conflict with those of holders of the ADSs.

Our controlling shareholders beneficially own almost all of our outstanding common shares. As a result, our controlling shareholders have the ability to determine the outcome of substantially all matters submitted for a vote to our shareholders and thus exercise control over our business policies and affairs, including the composition of our board of directors and, as a result, any determinations of our board with respect to our business direction and policy, including the appointment and removal of our executive officers, determinations with respect to mergers, acquisitions and other transactions, including those that may result in a change of control, sales and dispositions of our assets and the amount of debt financing that we incur.

Our controlling shareholders may direct us to take actions that could be contrary to your interests and may be able to prevent other shareholders, including you, from blocking these actions or from causing different actions to be taken. We cannot assure you that our controlling shareholders will act in a manner consistent with your best interests. Since May 24, 2019, one of our common shareholders, Kingsland, has been appointed as the managing member of our other common shareholder, BRW, as a result of which Kingsland currently exercises voting control over almost all of our common stock.

The ADSs are subject to certain foreign exchange regulations from the Colombian Central Bank which may impose registration requirements upon certain events of the ADS program.

Colombia’s International Investment Statute regulates the way foreign investors may participate in the Colombian securities market, prescribes registration of certain foreign exchange transactions before the Colombian Central Bank and specifies procedures under which certain types of foreign investments are to be authorized and administered. A holder of the ADSs who withdraws preferred shares from the ADS deposit facility under certain circumstances may have to comply directly with certain requirements under Colombian foreign investment regulations. Failure of a non-resident investor to comply with foreign exchange regulations may prevent the investor from obtaining remittance payments, including for the payment of dividends, may constitute an exchange control violation and/or may result in a fine.

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Our shareholders and the ADS holders are limited in their ability to receive cash dividends.

Under Panamanian law, we may pay dividends only out of retained earnings and capital surplus. Our bylaws provide that in principle all dividends declared by our general shareholders’ meeting will be paid equally to holders of preferred shares and common shares. Although there is a dividend policy that provides for the payment of dividends of at least 15% of our annual consolidated net profit, our board of directors may at any time, in its sole discretion and for any reason, amend or discontinue the dividend policy. If no dividends are declared, you will not have any right to participate in or override that decision. The distribution of dividends with respect to our preferred stock, if any, will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions, business opportunities, provisions of applicable law and other factors that the holders of our common shares and board of directors may deem relevant. As a result, we cannot assure you that we will pay dividends in accordance with our current dividend policy or otherwise.

Holders of our preferred shares are not entitled to preemptive rights, and as a result you may experience substantial dilution upon future issuances of stock.

Under our organizational documents, and in accordance with Panamanian law, holders of our preferred shares are not entitled to any preemptive rights with respect to our future issuances of capital stock. Therefore, unlike companies organized under the laws of many other Latin American jurisdictions, we will be free to issue new stock without first offering them to our existing preferred shareholders. We may sell common or preferred shares to persons other than our existing preferred shareholders at a lower price than that of the preferred shares traded as ADSs in the over-the-counter market and, as a result, you may experience substantial dilution of your interest in us.

The protections afforded to minority shareholders in Panama are different from, and more limited than, those in the United States and may be more difficult to enforce.

Under Panamanian law, the protections afforded to minority shareholders are different from, and more limited than, those in the United States and some other Latin American countries. For example, the legal framework regarding shareholder disputes, such as derivative lawsuits and class actions, is less developed under Panamanian law than under U.S. law, mainly because of Panama’s short history with these types of claims and the small number of successful cases in the country. In addition, there are different procedural requirements to initiate shareholder lawsuits. As a result, it may be more difficult for our minority shareholders to enforce their rights against us, our directors or controlling shareholders than it would be for shareholders of a U.S. company.

Holders of the ADSs may find it difficult to enforce civil liabilities against us or our directors, officers and controlling shareholders.

We are organized under the laws of Panama, and our principal place of business (domicilio social) is in Panamá City, Panamá. All of our directors, officers and controlling shareholders reside outside of the United States, except for two members of our board of directors. In addition, substantially all our assets are located outside of the United States. As a result, it may be difficult for holders of the ADSs to effect service of process within the United States on such persons or to enforce judgments against them, including in any action based on civil liabilities under the U.S. federal securities laws. Based on the opinion of our Panamanian and Colombian counsel, there is doubt as to the enforceability against such persons in Panama and Colombia, whether in original actions or in actions to enforce judgments of U.S. courts, of liabilities based solely on the U.S. federal securities laws.

Relative illiquidity of the Colombian securities markets and the OTC Pink Market may impair the ability of an ADS holder to sell preferred shares or the ADSs.

Our preferred shares are listed on the Colombian Stock Exchange, which is relatively small and illiquid compared to stock exchanges in major financial centers. In addition, a small number of issuers represent a disproportionately large percentage of market capitalization and trading volume on the Colombian Stock Exchange. A liquid trading market for our securities might not develop or continue on the Colombian Stock Exchange. A limited trading market could impair the ability of an ADS holder to sell preferred shares (obtained upon withdrawal of such shares from the ADS facility) on the Colombian Stock Exchange in the amount and at the price and time such holder desires.

Furthermore, we have delisted from the NYSE and the OTC market or the Pink Market, is the lowest and most speculative tier of the three marketplaces for the trading of over-the-counter stocks. All three tiers are provided and operated by the OTC Markets Group. This marketplace offers to trade in a wide range of equities through any broker and includes companies in default or financial distress.

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Exchange rate fluctuations may adversely affect the foreign currency value of the preferred shares represented by the ADSs and any dividend or other distributions.

Preferred shares represented by the ADSs are quoted in Colombian pesos on the Colombian Stock Exchange. Dividends and other distributions regarding our preferred shares, if any, will be paid in Colombian pesos. Fluctuations in the exchange rate between Colombian pesos and U.S. dollars will affect, among other things, the foreign currency value of any such dividends or distributions.

We are a holding company with no independent operations or assets, and our ability to repay our debt and pay dividends to holders of the ADSs depends on cash flow generated by our subsidiaries, which are subject to limitations on their ability to make dividend payments to us.

We conduct no operations and our only material asset is our equity interests in our operating subsidiaries. Accordingly, our ability to repay our debt and pay dividends to holders of the ADSs depends on the generation of cash flow by our subsidiaries and their ability to make such cash available to us through dividends, debt repayment or otherwise.

In addition, our subsidiaries may not be able to, or may not be permitted to, make distributions to us to enable us to make payments in respect of our indebtedness or to pay dividends. Restrictions in our subsidiaries’ debt instruments and under applicable law limit their ability to provide funds to us, and if our subsidiaries are not able to provide funds to us, we may not be able to repay our debt or pay dividends to our shareholders, including holders of the ADSs. In 2021, our management proposed that dividends not to be distributed considering our net loss in 2020, which proposal was approved at our annual shareholders’ meeting on March 26, 2021.