Caracas Chronicles

When all is said and done and Misión Cadivi comes crashing down along with the rest of Chavenomics, a lot of people will be very upset. But one group who really, truly should not be upset is the airline industry.

This comes into focus nicely in this Reuters story by Girish Gupta.

Thanks to Misión Cadivi, airlines flying out of Venezuela are making a killing. Essentially, they are oversold on all their flights, and they get to charge enormous amounts of money due to excess demand for airplane tickets. In a way, Cadivi is a subsidy for the airline industry, given how they get dollars at preferential rates. Airlines get to act as gatekeepers, issuers of the one document that allows you to buy something that costs 43 at a price of 6.

Go to Kayak and search for tickets out of Caracas. A round trip coach ticket from Caracas to Miami (a three-hour trip) in mid October costs $3,687 … on Santa Barbara Airlines fer cryin’ out loud! Madrid? It’s being quoted at $3,454. Lima is at $2,075. And so on …

The distortions, they are deep. A round-trip Caracas-Santiago ticket costs $3,232. But a round-trip Santiago-Caracas ticket on the very same dates costs $1,450 – less than half the amount from Distortion-land. In other words, thanks to Cadivi, airlines get to inflate their prices by at least 100%, and they get priority access to subsidized dollars.

A few years ago, American Airlines was furious when the Caldera administration dismantled the foreign exchange controls in place during the ’90s. They alleged they had sold airplane tickets in bolívars thinking the exchange rate was going to be one thing, and the government went ahead and devalued. They lobbied the US government and convinced them to lower Venezuela’s safety category for the first time, and things between the two countries have simply gone downhill from there.

When Cadivi is thrown into the dustbin of history, you will hear a lot of grumbling from the airlines. Don’t listen to them. They’ve been making a killing for the last few years.

When the party ends, they will whine and screech loudly. It will only be the laments of those who mourn rents that have gone dry.