A month after airlines thought they were about to receive the almost $4 billion in revenue trapped in Venezuela, the government has been seeking meetings with carriers to try to negotiate discounts on how much of the money it will repay.
Two dozen airlines are waiting for the proceeds of tickets sold locally in Venezuelan bolivars while the money is blocked by tight currency controls, according to the International Air Transport Association. Venezuela’s government has failed to authorize the repatriation of the cash for more than a year, and at least 11 airlines have curtailed flights, including the cancellation last month of three weekly flights from Toronto to Caracas on Air Canada.
Irritation from the airline trade group—in which IATA Chief Executive Tony Tyler griped that airlines “cannot sustain operations indefinitely if they can’t get paid”— comes one month after the officials in President Nicolás Maduro’s administration pledged to release the money at the official exchange rate from the time of the ticket sale. Venezuela’s currency has fluctuated from between 4.3 and 6.3 bolivars per dollar when the tickets were issued to the current official rate of nearly 11 bolivars.
In recent weeks, however, Venezuela’s Air Transport Ministry summoned several airlines to meetings at which government officials have suggested steep discounts, says IATA spokesman Jason Sinclair. When airlines declined, ministry officials sought a counteroffer and, according to Sinclair, talks reached an impasse. “The money has never belonged to the government,” Sinclair says. “There really aren’t any other countries in the world that have put airlines in a bind like this.” The transport ministry did not return messages left Tuesday by Bloomberg News.
American Airlines (AAL), the U.S. carrier with the most service to Venezuela, has $750 million in cash awaiting repatriation. Panama’s Copa (CPA) has almost $500 million there, and Avianca of Colombia has about $300 million. American and Copa carried the most passengers from Venezuela in February, according to IATA data.
For the airlines, the next likely step is further service cuts to Venezuela, a large country with ample wealthy and middle-class travelers. The market distortions caused by the currency controls—as well as the sharp divergence between the official and black-market exchange rates—have produced unprecedented demand for airfares in Venezuela over the past year. That windfall, even with money that is trapped, makes the market difficult for a frustrated airline to quit entirely.