Venezuelan Government Failing to Meet Its Promises to Airline Operators

The International Air Transport Association (IATA) called on the Venezuelan government to urgently honour the commitment made in March 2014 to permit the repatriation of $3.9 billion of airline funds at fair exchange rates. The funds are from sales of airline tickets in Venezuela and are being held in contravention of international treaties, according to the body which represents the interests of the world’s airlines.

IATA cautioned that that failure to release the airline monies puts at risk a major contributor to the well-being of the Venezuelan economy—sustainable air connectivity. “The situation is unacceptable. In March the Venezuelan Government promised airlines that it would release their money for repatriation at fair exchange rates. Since then there has been very little progress. Airlines are committed to serving the Venezuelan market but they cannot sustain operations indefinitely if they can’t get paid,” said Tony Tyler, director general and chief executive officer, IATA.

IATA continues its call for the immediate release of the blocked funds for repatriation at the exchange rates in place at the time the funds were generated. In most cases this was 6.3 Bolivars to the US dollar.

Throughout the month of April, the Venezuelan government made various offers to release some of the airlines’ funds, but at inferior exchange rates or with arbitrary discounts. These actions contradicted prior commitments to enable the airlines to repatriate the full amount they are owed and were rejected by the airlines, according to IATA. Through IATA the carriers are calling on the government to release the full amounts at the exchange rates applicable when the funds were generated.

A total of 24 airlines are affected by the Venezuelan currency controls. Blocked funds stood at $3.5 billion at the end of 2013. This figure has now increased to $3.9 billion. The situation is being exacerbated by other charges and taxes which are not aligned with International Civil Aviation Organization policy.

These included a 70 per cent rise in airport charges in December 2013 with no consultation or improvement in services provided; the introduction of special taxes on the air transport sector to fund activities completely unrelated to air transport. These actions have meant that within the past year, eleven of the 24 airlines operating in Venezuela have reduced operations between 15 per cent and 78 per cent while one has stopped flying to the country altogether.

“Globally, aviation supports over 57 million jobs and generates $2.2 trillion in economic activity. Preserving and protecting Venezuela’s connectivity should be a priority for the Venezuelan government. Connectivity to Venezuela is deteriorating. Urgent government action is needed. IATA stands ready to help, but we cannot move forward without the government’s commitment to make good on its promises,” said Tyler.

In our analysis below we look more closely at international flight operations from Venezuela between 2012 and 2014 using data from OAG Schedules Analyser. The information shows that international air capacity from the country was down 10.5 per cent in April 2014 versus the same month last year and the advanced schedules suggest that double-digit rates of decline will continue for the rest of the year, ranging from 12.2 per cent to 18.9 per cent.