Deutsche Lufthansa AG suspended ticket sales to Caracas, what one executive called its most profitable Latin American destination, joining airlines that have taken similar actions over Venezuela’s currency controls.
Panama’s Copa Holdings SA said last week it will cut routes to Venezuela, saying it’s owned $488 million by the government. Chief Executive Officer Pedro Heilbron said he wanted to reduce that amount to one “that is totally manageable.”
Airlines had an equivalent of $3.9 billion stuck in bolivars as of April, according to the International Air Transport Association. Those sales in the local currency can’t be repatriated because of a decade-long system of controls. The group said currency restrictions have prompted at least 11 carriers to cut capacity, sales or routes to South America’s largest oil exporter in the past year.
Nils Haupt, a spokesman for Cologne-based Lufthansa, said in an e-mail the suspension is temporary and that flights for those who have tickets already will operate normally. Lufthansa flies between Caracas and Frankfurt five times a week, the company’s only route in the country.
Since April, to better reflect the value of bolivar assets, international companies including Mercadolibre Inc and Brink’s Co. started devaluing their local holdings to Venezuela’s secondary exchange rate, wiping out more than 80 percent of the assets’ dollar value.
The value of revenue trapped in bolivars is being whittled away by the world’s highest inflation rate and frequent devaluations. Annual inflation hit 59 percent in March, with prices rising the most in four months, after the government carried out the biggest devaluation since currency controls were instituted in 2003.
On the government-run secondary market used for non-essential products and services, a dollar is sold for about 50 bolivars, compared to the 6.3 official exchange rate used by the foreign airlines and some other companies in their balance sheets.
A high proportion of business travelers make the Caracas route Lufthansa’s most profitable in Latin America, Donald Bunkenburg, a sales director for North America, was quoted as telling Colombian newspaper Portafolio on May 12.
Lufthansa is Europe’s second-largest carrier.