Bloomberg Línea — Brazilian online flight and holiday package booking platform 123Milhas filed for bankruptcy protection on Tuesday, just over a week after suspending the issuance of air tickets and packages of its “PROMO” line with shipments scheduled from September to December.
The company said in its filint to the 1st Business Court of the District of Belo Horizonte that it faces debts of 2.30 billion reais ($474 million)
The company has requested urgent financial relief to protect it for 180 days from measures to enforce the payment of its debts. The company’s lawyer in the petition is Ivo Waisberg, one of the country’s best known in the field of judicial recoveries, and who is a partner at TWK Advogados.
In a statement sent to Bloomberg Línea, 123Milhas said that “the measure aims to ensure compliance with the commitments made to customers, former employees and suppliers”, and that “the restructuring will allow all the amounts owed to be concentrated in a single court”.
“The company believes that, in this way, it will be able to reach solutions with all its creditors more quickly in order to progressively rebalance its financial situation,” the statement continued.
In the document sent to the courts, the company said that a frustrated expectation of a reduction in airline ticket prices post-Covid is also a reason behind the need for restructuring.
According to 123Milhas, “there was, in fact, a significant increase in demand (much greater than supply) for national and international flights”, which, “combined with the increase in the price of aviation fuel, caused by the fall in the real against the dollar and the rise in inflation, caused the price of tickets and packages to rise, making 123Milhas unable to acquire such products under the terms contracted with its customers”.
Other factors cited by the company are the pricing of tickets by airlines, which now require a greater number of points and/or miles to issue tickets, and the creation of new rules by the airlines in their loyalty programs.
According to the document filed with the Minas Gerais courts, these changes “have drastically restricted the use of points/miles by its participants”.
On Monday, 123Milhas laid off a significant number of staff, although the exact amount was not revealed. Post on social media indicate that around 140 professionals have lost their jobs at the company.
The company declined to comment on the layoffs to Bloomberg Línea.
According to lawyer Fábio Pimentel, from Pimentel Aniceto Advogados, 123Milhas’ restructuring “will have a slightly different outline than in other markets”.
“The company’s business is based on a highly speculative activity, which depends on the behavior of another market that it neither controls nor operates in, and which does not have a clear regulatory framework,” said the lawyer.
The company, founded in 2016 in Belo Horizonte, began operating as an intermediary between companies selling miles and customers looking for cheaper plane tickets.
123Milhas later began offering hotel reservations, travel packages, car rental and travel insurance.