Avianca Cuts Sales in Venezuela Bolivars on Currency ControlChristine Jenkins
Avianca Holdings SA is limiting sales in Venezuelan bolivars as currency controls leave the airline unable to withdraw cash from the country valued at $300 million, Chief Financial Officer Gerardo Grajales said.
Avianca, Colombia’s biggest airline, has been reducing its passenger capacity in Venezuela since August and will cut sales in bolivars “to the minimum possible,” Grajales said on a conference call today. The carrier is looking for ways to use the bolivars stuck in Venezuela, including paying for services such as call centers and filming commercials, he said.
Venezuela ordered the partial devaluation of the bolivar in January after the country’s reserves reached a 10-year low, reducing the rate at which airlines get reimbursed for ticket sales in the local currency. Economy Vice President Rafael Ramirez said Jan. 22 the carriers will have to use a higher, secondary exchange rate determined at weekly auctions when applying to convert bolivars from new sales into dollars.
Avianca decided to “reduce to the minimum possible the available seats for sales from Venezuela, on the flights we still have,” Grajales said today. The airline is waiting for “clarity” on how long the country will take to convert bolivar earnings into dollars and the method it will use to pay them, he said.
Airlines had the equivalent of $3.3 billion in bolivars trapped in Venezuela, according to the International Air Transport Association. The lag for the government to convert the earnings into dollars has increased as a dollar shortage deepens an economic crisis that’s stoked deadly street protests and calls from opposition parties for President Nicolas Maduro’s ouster.
Copa Holdings SA has $487 million trapped in Venezuela and last got dollars out of the South American country in October, Chief Executive officer Pedro Heilbron said last month. American Airlines Group Inc. had $710 million at the end of 2013 at an average rate of 6.04 bolivars to the dollar, with the period to exchange funds into dollars increasing to more than a year, according to a U.S. filing.
Bogota-based Avianca’s cash in Venezuela increased to $294 million at the end of last year, from $270 million at the end of the third-quarter, according to the company’s quarterly reports. It’s currently at about $300 million, Grajales said today on the call.
Avianca’s shares gained 2.5 percent to 4,340 pesos at the close of trading in Bogota while the benchmark Colcap index declined 1.1 percent.