The amount now owed by the government of Venezuela to the airlines that fly there has blown out to an astonishing USD4.1bn with no sign that the two dozen carriers involved will get their money.
The International Air Transport Association (IATA) has urged the the Venezuelan government to honor the commitment it made in March to permit airlines “to repatriate in full and at fair exchange rates” airline funds being blocked in the country.
“While the government has permitted the repatriation of USD424m shared among a number of airlines, continuing sales in the country have seen the total amount owed grow to a staggering USD4.1bn,” IATA said.
“Airlines can no longer afford the risk of not being paid when providing services to Venezuela.
“International capacity to and from Venezuela is down 49% from peak service levels offered last year and 36% lower year on year.
“The blocked monies are from ticket sales in Venezuela and are being held by the government in breach of international treaties.”
Why is the money being held by Venezuela?
Here is an explanation from Rohan Anand of upgrd.com:
“The delusional Venezuelan government, under current President Nicholas Maduro, continues to talk out of the sides of its mouth as it works with foreign carriers concerning repatriation for trapped sales funds in the country.
“Petroleum-rich Venezuela imposed currency exchange restrictions over a decade ago under late President Hugo Chavez’ government, forcing airlines to sell tickets in Venezuela in the local Bolivar currency and applying a regulated exchange rate.
“However, in 2012 the government started to limit the supply of US dollars to the airline industry, which created roadblocks for foreign carriers seeking to repatriate revenues accrued in the local currency.
“This buildup has continued through 2013 and as it stands today, debts to individual airlines have reached into the hundreds of millions.
“Adding to the headache for these carriers in Venezuela has been rising inflation and currency devaluation, thereby muddling any hopes of receiving funds at the appropriate exchange rates during the time at which the sales were incurred.
“Given the governments’ tight control over air service access to Venezuelan airports, airlines have been reluctant to completely withdraw services, which could potentially (and likely) risk long-term ban from resumption in the near-term future.
“Despite its political challenges, Venezuela is a high-yielding, lucrative market for foreign carriers. “
Stating the obvious, IATA said: “Airlines cannot offer service when there is no certainty of payment.
“Confidence in the market is falling sharply. Most carriers are limiting their risk with reduced capacity.
“Several have completely pulled out.
“Venezuela risks becoming disconnected from the global economy.”
IATA director general Tony Tyler has requested a meeting with President Maduro to negotiate a solution.
He’s still waiting to hear back on that.