MIAMI — The International Air Transport Association (IATA) announced that it filed a request for antitrust immunity with the U.S. Department of Transportation (DOT) to allow airlines to discuss options to maintain connectivity to Venezuela, after refusal from the government of the Latin American country to clear the repatriation of their income from the sale of tickets and cargo space in Bolivars, the local currency.
Such clearance is necessary as Venezuela is under a currency exchange regime imposed since 2003. Just after the death of president Hugo Chavez in 2013, the remittance of funds, which used to take 45 days to be processed, began to be delayed without reason.
As the Venezuelan economy is highly dependent on oil—which accounts for 95% of the country’s exports and 25% of its gross domestic product (GDP)—the worldwide drop in oil prices caused Venezuela’s foreign currency reserves to run low. The consequences have been disastrous. The Bolivar has lost value, inflation has soared, and basic products are scarce.
Just this year, airlines such as GOL, LATAM Airlines and Lufthansa have opted to cancel their flights to Caracas, while others have drastically reduced their frequencies or closed routes. For example, American Airlines, which used to have a major presence in Venezuela, it has slashed almost 80% of its frequencies between Venezuela and the USA, with just two daily flights from Miami to Caracas, and six weekly flights from Miami to Maracaibo.
These measures are intended to decrease the exposure to risk of these carriers serving Venezuela, given the overall instability of the country, and the potential and unexpected measures that Maduro’s government may eventually take (especially in the matter of foreign exchange policies).
“Despite years of effort by IATA and its members to resolve the issue, there has been little action by the Venezuelan government. We are now asking the US government to approve anti-trust immunity for discussions among airlines focused on maintaining connectivity while the blocked funds crisis persists,” said Alexandre de Juniac, IATA’s Director General and CEO.
According to IATA, the outstanding collective sum to be repatriated equals to $3.8 billion at the 2013-2014 official exchange rate (VEB 6.30 = 1 USD)
“To be clear, the intention is not to do anything that is anti-competitive. On the contrary, our member airlines seek to explore a global solution allowing them to keep Venezuela connected to the world and do business normally in a country that is not meeting its international obligations,” said de Juniac.
The decline in air travel in Venezuela will continue. The lack of a commitment between the government and foreign carriers to clear the trapped funds, the Venezuelans’ dwindling purchasing power, and the unending economic distortions will cause more international routes to shut down in the short term, leaving the country with even less connectivity and more isolation from the world.