Avianca Surges With Copa on Venezuela’s Pledge to Pay

Avianca Holdings SA and Copa Holdings SA rallied on speculation Venezuela will let airlines exchange their bolivars for dollars at the official rate.

Copa, Venezuela’s second-biggest carrier by capacity, rose 4.4 percent to $141.67 today in New York for the biggest gain in six weeks. American depositary receipts of Avianca, Colombia’s largest airline, jumped 3 percent to $17.24.

President Nicolas Maduro authorized his government to pay $3.8 billion owed to international airlines, revenue calculated using the official exchange rate at the time of the sale, Venezuelan Airlines Association President Humberto Figuera told reporters in Caracas. While the official exchange rate is 6.3 bolivars per dollar, currency controls have left the bolivar trading at about 65 per dollar in the black market.

“This is a giant step forward,” Figuera said, adding that payments will be received over this year and next. “We are thankful to the government for recognizing all of its payment obligations.”

Air Transport Ministry press officials didn’t return phone calls and e-mails seeking comment.

At least 11 airlines have cut capacity on Venezuelan flights in the past year, some by as much as 78 percent, as the currency controls made it increasingly difficult to expatriate local earnings, according to the International Air Transport Association. Air Canada stopped flying to Caracas this month.

Bogota-based Avianca drew about 7 percent of its revenue from Venezuela while Copa generated about 15 percent, according to JPMorgan Chase & Co. estimates. JPMorgan cut its price target for Avianca and Copa today before the announcement as it assumed a 50 percent write-off for the airlines’ cash in Venezuela.

Cash Holdings

Avianca has about $300 million in cash in the country, or about 40 percent of its total cash holdings, according to company filings and conference calls. Copa, based in Panama City, has $487 million in Venezuela.

“The news is certainly positive and supportive for the shares,” BTG Pascual analyst Renato Mimica said in a report to clients today.

The payment schedule announced by the association means airlines will receive their dollars up to four years after the ticket sale, said Russ Dallen, the head trader at Caracas Capital Markets, said in a telephone interview from Miami.

“After Air Canada pulled out last week, it’s a crafty way to try to keep the airlines serving Caracas,” he said in an e-mailed comment.

Since February 2014, airlines have received dollars for new ticket sales at a secondary auction rate that last traded at 10.8 bolivars per dollar. A dollar fetched 65 bolivars in the black market on the Colombian border today, according to, which tracks the rate at exchange houses. Venezuela devalued the bolivar to 6.3 per dollar from 4.3 in February 2013.

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