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Venezuela Stonewalls IATA on Debt to Global Airlines

Mar 26, 2014 3:00 pm

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Venezuela isn’t being especially accommodating to airlines trying to recoup revenue due to the country’s currency’s woes. Just ask Air Canada. The airline suspended operations to Venezuela, and the country immediately severed all ties with the airline.

— Dennis Schaal

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Jorge Silva  / Reuters

Venezuela's President Nicolas Maduro speaks to the Union of South American Nations' (UNASUR) foreign ministers at Miraflores palace in Caracas March 25, 2014. Jorge Silva / Reuters


The group that represents the international airline industry said on Wednesday that top Venezuelan government officials have not responded to its requests for talks on $3.8 billion in unpaid debt resulting from the country’s currency controls.

Venezuela requires airlines to bill tickets sold to the country’s residents in local bolivar currency but has not approved requests to repatriate the resulting revenue, the International Air Transport Association (IATA) said.

“We as IATA haven’t succeeded in engaging the senior levels of government in any discussions,” IATA Chief Executive Tony Tyler said during the FIDAE airshow in Santiago. “We’d be very keen to do that. At any time, I would go for a meeting with the president or the senior ministers to find a solution to the problem.”

Tyler said that within the past year, 11 airlines that have been flying to Venezuela have reduced their operations by between 15 and 78 percent.

Individual airlines have held meetings with government officials, but without results, he said. Major airlines flying to Venezuela include American Airlines , Lufthansa , Delta , Avianca and Copa.

Air Canada suspended its operations this month, citing security concerns related to street protests, and Venezuela immediately cut ties to the airline.

“I need hardly remind anyone here that this is not the government’s money, it is money the airlines earned by providing air transportation to the citizens of Venezuela,” Tyler said.

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.

Local companies routinely buy dollars on the illegal black market, but foreign companies generally avoid doing so because of the potential legal repercussions.

Tyler said this month the government had promised to pay debts dating back to 2012.

“It is crucial the government now take the next step and release the airlines’ money, and that it do so at fair exchange rates,” he said. “Airlines can’t be expected to keep serving a market if they can’t get paid.”

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.

President Nicolas Maduro has promised to ensure the airlines get paid, but has threatened to kick out any that halt services as a result of payment disputes.

(Writing by Brian Ellsworth; Editing by Andrew Cawthorne; and Peter Galloway)

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