Venezuela Against the World: Shafting Int'l Aviation

Simon Bolivar Int'l Airport's Stalinist architecture is fitting.

A few weeks ago I wrote about Air Canada's decision to stop flying to Venezuela over the country's non-reimbursement of fares from flying Venezuelan passengers. You see, international carriers are obliged to price tickets in bolivars, after which Venezuela compensates them in US dollars--or so the arrangement should work. Frustrated with repeated delays in being paid, Air Canada simply left, and the Venezuelan government in effect said "goodbye, good riddance and don't come back." However, the companies it has annoyed are hardly confined to Canada's national carrier. After being barraged with similar complaints, Venezuela vowed to pay the $3.8 billion or so owed these airlines so they could take their earnings home at the end of last month. For a country that imports over two-thirds of its goods from abroad, transport links are rather important.

Or so the story went. After yet more delays in being paid in cold, hard foreign exchange, trade group the International Air Transport Association (IATA) has now issued a press release on the airlines' continuing maltreatment at the hands of the Bolivarian Chavistas:

IATA continues its call for the immediate release of the blocked funds for repatriation at the exchange rates in place at the time the funds were generated. In most cases this was 6.3 Bolivars to the US dollar.

Throughout the month of April, the Venezuelan government made various offers to release some of the airlines’ funds, but at inferior exchange rates or with arbitrary discounts. These actions contradicted prior commitments to enable the airlines to repatriate the full amount they are owed and were rejected by the airlines. Through IATA the carriers are calling on the government to release the full amounts at the exchange rates applicable when the funds were generated.

The tab keeps going up in the meantime:

A total of 24 airlines are affected by the Venezuelan currency controls. Blocked funds stood at $3.5 billion at the end of 2013. This figure has now increased to $3.9 billion. The situation is being exacerbated by other charges and taxes which are not aligned with International Civil Aviation Organization policy:

• In December 2013 airport charges were hiked by 70% with no consultation or improvement in services provided
• Special taxes have been levied on the air transport sector to fund activities completely unrelated to air transport

Air transport is succumbing to these growing challenges. Within the past year, 11 of the 24 airlines operating in Venezuela have reduced operations between 15% and 78% while one has stopped flying to the country altogether [Air Canada].

In Venezuela's case, I think the reasons for non-payment are not ideological but financial. Sure its leftist policies may have emptied its foreign exchange reserves as those with better sense flee this basket case, but the Venzuelan authorities are not withholding payment to these airlines to "punish" the capitalist scum but because they country is really quite broke. Remember, they have also screwed erstwhile socialist brother in arms Ecuador. Despite already having a four-tiered system of exchange rates, they may have to add another rate for airlines. Namely, zero dollars for any amount of bolivars.