Sky high ordeal

46569_2013080758It has become very hard for foreign airlines to keep working in Venezuela. Thanks to currency controls, the government (through CADIVI) owes them around two and half billion dollars.

After a proposed trueque deal of bonds and free fuel didn’t quite fly, some airlines are starting to consider the idea of just packing their bags and leaving Venezuela for good.

Meanwhile, Venezuelan travelers are suffering the consequences of this situation, as this article from Bloomberg’s Anatoly Kurmanaev and Christine Jenkins present us. 

“Gladys Varela is stuck in Venezuela this Christmas. After scanning travel agencies in Caracas for three months for a plane ticket to visit her daughter in Mexico, she found airlines want nothing to do with bolivars…

“I went to 10 air companies and agents all over town and everywhere I received the same answer that no tickets were available,” said Varela, who works at a beauty salon in Caracas. “Looks like I won’t see my daughter this year.”

Our advice to airlines: cut your losses. Sad as it is to say, you are likely never going to get your money back. The time to bail … was yesterday.

35 thoughts on “Sky high ordeal

  1. Yeah we are sending my nephew to Punto Fio via Aruba. Found a friend of a relative that owes a favor so got a private small aircraft Aruba to Las Piedras. He’s a lucky kid. Otherwise no way in our out of Venezuela via any direction or airline short of paying 3000 USD. I have to wonder if some of this is still the Raspao but in the end it all sucks one way or the other.

  2. I think this is the airlines making a bluff. Government has paid late, but when it pays it pays a lot.
    Caracas – Madrid is the most profitable route for both Iberia and Air Europa. Miami – CCS is the most profitable route for AA.

    In 2012, AA made something like $250 millions in Venezuela alone. That’s like 1% of their total income.

    The only victims in distortioland are the Venezuelans that subsidized airline operations and actually didn’t travel.

    • “The only victims in distortioland are the Venezuelans that subsidized airline operations and actually didn’t travel.”

      Ita est! And you will never hear neither the Boliburgueses nor Borges stating this.
      Why? The first ones simply because they don’t care. The second one I think because he just hasn’t thought about it, as simple as that…it seems for them all you have to be an economist with a PhD in something to see this through.

    • “In 2012, AA made something like $250 millions in Venezuela alone. That’s like 1% of their total income.”

      That is not a correct statement, because in 2012, American Airlines was not paid for six months for tickets sold. Thus, this “profit” only exists in accounting ledgers that say American Airlines sold tickets, received Bs. which were converted at the time at US$ 5.3 per US$. By now, those Bs. will be accounted for at Bs. 6.3 per US$ (a loss for AA) and if the Government does not pay by January and devalues, then it will be registered at Bs. 11-12 per US$ or whatever rate is established. And the profits keep dwindling. Profits are money in the bank, in US$, not virtual dollars in Venezuelan banks. Ask BBVA, which will take a hit of maybe US$ 1.5 billion with the upcoming devaluation.

      • Do you remember what happened when Caldera nixed the OTAC back in the 90s? Airlines had been promised the bolivars used to sell tickets would be changed to official dollars. Then devaluation occurred, and the promises were swept away in the wind. In retaliation, AA lobbied the US government to downgrade Venezuela’s aviation authorities, and Venezuelan consumers have been paying the price ever since.

  3. …the government (through CADIVI) owes [foreign airlines] around two and half billion dollars

    How does this work? Did the airlines pay bolivars to CADIVI which they have not yet received dollars for?

    • The article says it in a clearer way:
      “Airlines have the equivalent of $2.6 billion locked in the country at the official exchange rate of 6.3 bolivars per dollar,”

  4. Airlines have instituted a blockade on travel to from Venezuela as a means of pressuring the govt to allow fares paid in bs to be converted into dollars and sent abroad , the govt doesnt have the dollars to fund the conversion and have unsuccesfully tried to substitute dollars for locally produced jet fuel paid in bs . Venezuela is transformed into a cage where no one can enter or leave because the govt simply has lost/wasted its capacity to meet the foreign currency demands of the countries normal activities , we are become a hermit kingdom of the kind we read about when reading about old japan or tibet .

    • Not a blockade, merely scarcity.

      The article actually states that airlines are happy selling tickets in dollars or colombian pesos (COP). It’s bolivars they’re not taking.

      They show one or two cases of tickets reported as unavailable in Venezuela, yet available for foreigners making connections through Venezuela.

      • No J, its a blockade , maybe cosmetized but a true blockade , I have friends and relatives living abroad and wanting to travel to Venezuela , and they are having problems , not as great as those of Venezuelans traveling abroad but real , among them that the fares for traveling to Venezuela have suddenly become sky high,or in the words of El Pais ‘extravagantes’ . Have an acquiantance who must travel to france on march and despite efforts by its international employer outside Venezuela to get a flight hasnt been able to get it. This is being reported in the world press and although some chinks remain where travel is made possible they are fast shrinking. Probably the blockade is not total but suffficiently tight to make a noticiable difference . Had a friend who had to travel to a business meeting to Panama and the only way to get there was by chartering a private plane to Aruba and from there taking an airline to Panama . But this is only a sign of other problems to come , have relatives who supply industrial parts to factories which they get from two local factories and imports , the two factories using one pretext or another have stopped deliveries since late november and the imports have ceased for lack of the green stuff. All they have is their inventories which of course wont last indefinitely. The reason why the regime is now all of a sudden making ‘sweet eyes’ at the newly elected oppo mayors is because they know that things are going to get very ugly and they want to minimize their exposure to outside attacks.

        • Mmm… Ok.

          I agree with the assessment of the situation: tickets, even in foreign currency, are scarce and expensive.

          But, (I’m nitpicking), for me it resembles more the closing of credit lines than a trade embargo or a blockade. I mean, sure Panama and Colombia are reluctant to ship merchandise on credit to Venezuela, but they have no problem sending merchandise if payed in advance.

          I think the same would be true of airlines. There are several options closed off in bolivars, that are available in foreign currency (like buying foreign originated tickets). I remember Samán criticizing that some airlines/travel agencies wanted to charge people in CADIVI dollars.

          “Blockade” or trade embargo are more appropiate to describe the US measures against Cuba.

          • Im not being technical about the use of the word blockade, Im referring to the fact that it works or has the effect of a blockade in that it creates artificial barriers to the purchase of tickets to from Venezuela which would not exist but for the intent of the airlines to pressure the govt to pay up what they are owed. The hiking of fares from outside Venezuela to extravagant levels is one cosmetized form of instituting a blockade , the acquiantance whose company would pay for the tickets in hard currency abroad 4 months in advance and yet would not get the ticket is part of the blokade . They are playing hard ball and what name we give their tactics doesnt change what they are !! Years ago the french car industry felt threatened by the surge of japanese car imports so they decreed that all japanese car imports could only come into the country through one specific port , a small port , which made japanese cars very difficult to import to france because of the insufficient size of the facilities , the methods may vary but the motivation and bad faith is clear . It would not be a blockade if they let people buying tickets in hard currency abroad the same fares and slots they used to enjoy in past years !!

              • You ve got me Miguel, if the flights are full and are there are the same number of flights as in the past there is currently no blockade . there might be a blockade in the making if as a result of airlines now limiting the access of potential passengers directly ( or by making them overly expensive) create the conditions for reducing the number of available flights in the future . I have no idea if the airlines are planning to maintain the same number of flights next year . it would make economic sense to them to reduce the number of flights to from Venezuela if they dont get paid in the currency in which they operate or in freely convertible Bs which is evidently not the case now. You see many oppo newspaper getting printed now but if the govt increasingly denies them the currency they need to import paper maybe in future they will no longer be able to print their papers , that would be a.. what ?? a case of the govt applying its policy of abusive restrictions to freedom of the press ( a news blockade of sorts) .

        • But here is the thing. Airlines LOOOOVE the currency exchange control, when it pays.

          When RECADI was dismantled the airlines kicked and cried all they could. And they will if CADIVI is dismantled too.

          • Of course its a helluva of a business, because at the end passengers never get the subsidized price for ticket, its just making the airline richer, I bought a ticket to Santiago for 2,000 $ at the official rate, and its obvious the airline are using a different exchange rate to calculate cost and then they just convert that to the price tickets.
            I think the situation with RECADI is very different Rodrigo, in that time what was eliminated was their access to a preferential dollar, they could still get dollars after RECADI was dismantle at a higher rate and continue to operate, if airlines stop getting CADIVI dollars, there is no way for them to get access to currency . And with the shortage of dollars for stuff like food and medicines, eliminating CADIVI for airlines is a good way of saving billions without risking social turmoil , scaring more people into exile and having more control over citizens,

    • Fear mongering, yes? While the current situation is worrisome, the outright unavailability of airlines tickets for the holiday season is nothing new for us Venezuelans. Compound it with the raspadito, and there you go. You can’t buy tickets. And of course, you can use that to push CADVI a little bit (“look, you better pay us quick”).
      OTOH, Maiquetía is filled to the brim with a nightmarish crowd of people who did the right thing and brought them in advance- as always.
      C’mon, let’s read again what AA had to say. They just ran out of seats- they are not leaving the country.

      • Dude, you cannot get a ticket for MONTHS!!! and if you do for something after april you have to pay $3000 from the US. This is three times the cost to Europe, or the cost from the US to some exotic African country.

        Contrast this with $500 – $1000 in the past few years.

        This is splitting families, let alone commerce, business, culture and beyond.

        I take my family to visit their relatives every Christmas, I purchase the tickets in March and there is no way I will make it for 2014.

    • That means that to fight the inflation that results from the BCV’s money printing financing of Pdvsa deficit expenditures you need gas price increases and a bs devaluation that frees up US$ 40 billion to cover Pdvsa’s expenditures . Two obvious problems with that , first that the size of such gas increase /bs devaluation may be so large that the govt will balk at the political consequences of such measures , second problem is that if they hike the gas price and devaluate the bs as required to stop the BCV printing presses inflation will rise to levels probably as high as those as are caused by the BCV financing of Pdvsa , so your are dammed if you do and dammed if you dont . The govt is denifitely in a pickle!!

        • Caribbean Airlines (national flag carrier of Guyana, T&T and Jamaica) sought to take advantage of the ever increasing number of Venezuelans using Trinidad as a connecting point to/from New York and Toronto.They requested to upgrade the capacity on their daily flight to/from CCS from ATRs (68 seaters) to B737′s (154 seaters).

          INAC shot down the request and gave the lame excuse that Conviasa has to start direct flights to POS from CCS before they’ll approve the capacity upgrade for Caribbean Airlines.

  5. I had to change my return from South East Asia to Caracas last October and no flight was available on Lufthansa until April 2014. I finally managed to come back in November. On the plane, in business class, not a seat empty. I went to have a peek in economy, not a seat available. I did not check the cockpit as I was afraid a passenger would be sitting on the pilot’s lap. Planes are simply full. The most interesting part of the trip is that a lot of the business class was occupied by little monkeys, generally 16 to 18 year old, part of a National wrestling team coming back from I believe Bulgaria, que asco. Now I got out to North America on a ticket bought a long time ago, same scenario and same monkeys.

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