Where Have All the Flights to Venezuela Gone, and Why Can’t You Get There From Here? (View from the Wing)

American, the largest US airline to Venezuela, is flying daily from Miami… with a 737. They shift up their schedule in the fall and return to flying New York JFK – Caracas just 5 days a week. Also with a 737. They bring back San Juan service too.

Delta is flying a 737 to Caracas four times weekly with a 737. United flies daily from Houston only, also with… a 737.

LAN is flying 2-3 times a week with a widebody from Miami, and of course there’s connecting service through Central America.

But much of the lift between the US and Caracas is just gone. And the story here is simple.

Back in 2008 Venezuela’s currency controls were considered an airfare arbitrage opportunity.

The riskiness of holding Venezuelan assets, though, was certainly underscored when the country nationalized a Hilton. (Not even a first in Venezuela for that brand.)

Nonetheless, as currency controls loosened for residents somewhat airline tickets became an arbitrage tool in a different way, an opportunity to get money out of the country and to convert currency from the black market rate to the official rate.

But those same currency controls, which tightened on airlines and prevented them from taking currency out of the country, translated into fewer flights to and from Venezuela as airlines bailed from the market to limit their exposure.

How much money is frozen and at stake for the world’s airlines? Over $4 billion is currently stuck.

The International Air Transport Association said Monday that airlines worldwide now have $4.1 billion of their revenues held up in Venezuela because they can’t get the money out of the country.

“Airlines can no longer afford the risk of not being paid when providing services to Venezuela. International capacity to and from Venezuela is down 49% from peak service levels offered last year and 36% lower year on year,” the airline group said.

“The blocked monies are from ticket sales in Venezuela and are being held by the government in breach of international treaties. Considering that the global air transport industry is expected to post a collective $18 billion profit this year, the outstanding $4.1 billion is significant,” it said.

American has 20% of those funds, itself, held up in the country. They’ve reduced their schedule 79% as a result.

It’s a sad state for Venezuelans, who face a challenge in getting out of their country and face a higher price with capacity tight. And the country will have a hard time re-building trust with international airlines, having shown that their funds can be effectively expropriated at-will.

This last may not be true. Airlines may return back as soon as their funds are released. As we’ve seen, hotels have been taken by the government at will — and the international travel industry continued to do business with Venezuela. Clearly, as the current currency freeze demonstrates, at their peril.

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The post Where Have All the Flights to Venezuela Gone, and Why Can’t You Get There From Here? appeared first on View from the Wing.

Comments

As a Star Alliance frequent Flyer Ua 1k Sen Living in Venezuela ... by Orlando Corp
@Vinny That's the most interesting post I've ever read on any ... by MFK
Maybe this is the perfect time to book last minute award ... by ffi
This situation is such a mess. Don't even where to start. But ... by Vinny from VM
If this is still a risk, why is AA or anyone else still flying ... by Andrew
Plus 3 more...

Where Have All the Flights to Venezuela Gone, and Why Can’t You Get There From Here?

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