IATA has sent its fourth letter to Venezuelan President Nicolas Maduro to allow airlines to repatriate funds, now estimated to be $4.1 billion, at the original exchange rate.
To date, Venezuela has allowed the repatriation of $425 million to airlines, but the country also is offering to allow airlines—and other companies—to repatriate funds at a much lower exchange rate than the 6.3 bolivars to the dollar at which the revenues were accrued.
IATA DG Tony Tyler recently called this offer a significant discount, and few airlines have taken the government up on it. “Airlines cannot offer service when there is no certainty of payment,” Tyler said. “The Venezuelan government has made many promises to abide by its obligations. But $4.1 billion remains unpaid.”
Airlines have cut service to the country and say they will continue reducing capacity until the government surrenders the revenue owed to them. IATA estimates that capacity to Venezuela is down 49% from last year. “Venezuela risks becoming disconnected from the global economy,” Tyler said.
Earlier in July, Delta Air Lines was the latest US carrier to pull capacity out of the Venezuela market. The carrier, which is negotiating with the government to repatriate more than $180 million it is owed, will from Aug. 1 reduce its schedule from a daily flight from Atlanta to Caracas to a weekly frequency.
American Airlines has more than $750 million trapped in Venezuela, is reducing its schedule from 48 weekly flights to 10, while Panama’s Copa Airlines, with $500 million in funds in Venezuela, is dropping its schedule by 40% for the rest of the year, mainly by reducing aircraft.
In its letter, IATA requested a meeting with Maduro to negotiate on repatriating funds to the two dozen airlines that are owed money. “Air transport could also play a significant role in the Venezuelan economic recovery,” Tyler said. “Without robust air links to the world, there is little chance of a recovery.”
In June, Tyler said a few carriers had taken the discounted rate, but most major carriers were holding out for the full amount owed to them. Venezuela, after years of economic mismanagement and falling foreign currency reserves, has instituted currency controls. This is preventing airlines from converting bolivar-denominated revenue into dollars. The country recently offered companies an exchange rate of 50 bolivars to the dollar in order to preserve foreign currency reserves for essential goods such as medicine.