Members of the International Air Transport Association are
frustrated with accumulation of local currency that they cannot
transfer out of the country without incurring heavy losses, and
disappointed with government silence about potential solutions.
"I am aware that some of (the airlines) are considering very
significant cutbacks or indeed suspending operations," said IATA
Chief Executive Tony Tyler when asked in a Reuters interview on the
sidelines of FIDAE airshow in Santiago.
"The airlines want to keep serving the market. They want to keep
connecting Venezuela to the world. But they do expect to get paid
Venezuela requires airlines to bill tickets sold to the country's
residents in local bolivar currency, but the government currency
board has not approved requests to repatriate the resulting revenue.
Tyler said that within the past year, 11 airlines that have been
flying to Venezuela have reduced their operations by between 15
percent and 78 percent.
Air Canada <ACb.TO> suspended its operations this month, citing
security concerns related to street protests, and Venezuela
immediately cut ties to the airline.
Individual airlines have held meetings with government officials,
but without results, Tyler said. Major airlines flying to Venezuela
include American Airlines <AAL.O>, Lufthansa <LUFT.UL>, Delta <DAL.N>,
Avianca <AVT_p.CN> and Copa <CPA.N>.
The IATA is keen on holding talks with government to seek a solution
but has not been able to engage senior officials.
Venezuelans now struggle to find flights out of the country,
sometimes waking before dawn to find the few available fares.
Travelers often say flights abroad are nearly empty.
"The simple fact is that many airlines have stopped substantial
sales in Venezuela because they haven't been paid for the last year
or so," Tyler said.
"Very few airlines are still selling in Venezuela, which of course
can't be good for the country.
President Nicolas Maduro has promised to pay the debts back in full,
but has also threatened to kick out any airlines that suspend
service over the payment disputes.
The currency control system, created in 2003 by late socialist
leader Hugo Chavez, requires companies to seek approval from a state
currency board to purchase hard currency.
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Local companies routinely buy dollars on the illegal black market,
but foreign companies generally avoid doing so because of the
potential for legal repercussions.
Tyler said the airlines were sympathetic to creative solutions such
as using government bonds or jet fuel to settle the debts but that
no progress had been made.
"In fact we had fuel experts visit the country, with a view to
taking that idea forward," he said. "We had some preliminary
discussions with trading companies who could help broker that kind
of deal. But then the government has subsequently gone silent on
both those options."
Venezuela launched a new foreign exchange platform this week with a
rate of around 52 bolivars per dollar, which could open a legal
avenue for companies to send money back to headquarters.
But using this system would create heavy losses for airlines that
have been billing tickets at the official rate that was 4.3 bolivars
per dollar in 2012 and 6.3 for most of 2013.
The country's top economic official has said such losses are simply
a part of the currency risks of international business and not the
responsibility of Venezuela's central bank.
Tyler said the airlines expect to be reimbursed at the official
"Sure you may have to take a foreign exchange risk, but what we're
talking about here is out of all proportion to normal airline
financial planning or financial provision," he said.
(Writing by Brian Ellsworth; editing by Andrew Cawthorne, Peter
Galloway and David Gregorio)
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