MIAMI — This week, LATAM Airlines and Lufthansa have joined the list of airlines that have opted to cut service to Venezuela. Once considered the Gateway of the Americas, Caracas Simon Bolivar Intl. Airport is now a shadow of its former self.
Currently, there are two main factors driving airlines to cease their flights to Venezuela, particularly to Caracas, its capital city. The first is the refusal from the leftist regime led by Nicolas Maduro 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 the country is under a strict currency exchange control imposed since 2003. Since 2013, just after the death of president Hugo Chavez, the remittance of funds, which used to take 45 days to be processed, began to be delayed without further reason.
During the recent Annual General Meeting of IATA in Dublin, the Association urged to governments to respect international agreements obliging them to ensure airlines are able to repatriate their revenues.
“Air connectivity is vital to all economies. The airline industry is a competitive business operating on thin margins. So the efficient repatriation of revenues is critical for airlines to be able to play their role as a catalyst for economic activity. It is not reasonable to expect airlines to invest and operate in nations where they cannot efficiently collect payment for their services,” said in a statement Tony Tyler, IATA’s General Director and CEO.
The outstanding sum to date is around $3.8 billion, with American Airlines, Copa Airlines and Lufthansa leading the list.
In order to minimize the exposure to risk, carriers have taken different measures, from limiting the sale of tickets to a determined period of time to offer sales in US dollars only. During 2014 and 2015, the measures seemed to be enough to halt, at least temporarily, the exodus of foreign carriers from the Latin American country while closing routes or decreasing frequencies. However, the daunting economic crisis has hurt the market, causing a drop in the demand to fill flights.
According to data provided by the Association of Airlines in Venezuela (ALAV), the decrease in passenger demand is about 45%, complicating the scenario for foreign carriers to maintain operations in the troubled Latin American country.
During 2016, Brazil’s GOL ceased all flights to Caracas, now with LATAM’s departure, Venezuela lost most of its connectivity to Brazil, one of its main commercial and political allies in the region.
Meanwhile, Venezuelan domestic carriers have struggled to keep afloat, by swapping their domestic flights for international services, in a move sought to obtain foreign currency required to cover its operational expenses.
Particularly, Avior Airlines and Aserca, the leading private carriers in the country, have expanded their international operations and reduced to a minimum its domestic flights. Meanwhile, state-owned Conviasa’s financial woes have caused it to ground most of its fleet while experiencing operational difficulties.
With a economy in freefall, an impoverished local market and a growing gap between the official and black market currency rates, Venezuela air travel market is in shambles. There is no doubt that more airlines will leave the country in the coming months.