Published On: Mon, Jul 14th, 2014

Venezuela’s airlift woes deepen as United cuts flights

maiquetiaairportCARACAS, Venezuela -- On Friday, United Airlines became the last of the three largest US carriers to cut flights to Venezuela in a dispute with the government over cash trapped in the country.

Service will be reduced to four round trips a week from the current daily flights, a 43 percent reduction, effective September 17, United said.

Earlier this month Delta Air Lines announced that the airline is reducing service by 85 percent, replacing its daily roundtrip flight between Atlanta and Caracas with one roundtrip weekend flight as of August 1.

Frustrated over the continued non-payment of some $750 million owed to it by Venezuela through March 31, American Airlines has also cut its weekly flights to the destination to ten, down from 48 previously.

Other international and regional airlines have taken similar action.

Italian airline Alitalia announced in May that it was suspending all flights to Venezuela "due to the ongoing critical currency situation” in the country, "which is "no longer economically sustainable."

The decision by Alitalia followed a similar suspension in late March of all flights to Venezuela by Air Canada and a number of regional airlines have reduced the frequency of flights. Colombia's Avianca has reduced itineraries by more than two-thirds. Other airlines represented by the International Air Transport Association (IATA) are considering suspending all flights to Venezuela.

Lufthansa said the Venezuelan problem had cost it €60 million ($81.2 million) and contributed to the airline’s profit warning. The German carrier also suspended ticket sales in the country for several days last month and will reduce its Frankfurt-Caracas service to three weekly flights from daily beginning this month.

“The airlines get to a point where they want to serve the country and they want to serve the Venezuelan people,” said IATA spokesman Jason Sinclair. “But they’re owed so much money, it just becomes not viable to operate in Venezuela.”

The Venezuelan government and a half-dozen, mostly smaller airlines in the region agreed last month to terms on repayments. The deal reduced the outstanding debt owed to the airlines by about $200 million, Sinclair said.

One of the airlines finally receiving payment from CADIVI, the Venezuelan foreign exchange authority, was Curacao airline InselAir, which was reported to have been paid a large part of its outstanding debt of $75 million.

The exact amount is not known, but it is said to be about three-quarters of the total outstanding debt.

According to the Association of Venezuela Airlines (ALAV), out a total of 25 international airlines operating to and from Venezuela, 16 have not yet signed a payment agreement with the government, through the aeronautical authorities.

Those companies that are still waiting for an agreement are Air Canada, Air France, Alitalia, American Airlines, Avianca, Caribbean Airlines, Copa Airlines, Delta Air Lines, Federal Express, Iberia, LACSA, LAN Airlines, Lufthansa, TACA, TAP Air Portugal and United Airlines.

ALAV indicated that the cumulative amount owed as of December 2013 is $3.4 billion.

Most of the major international airlines flying to Venezuela have declined the government’s offers because they include significant discounts on the principal amounts and have long repayment schedules.

“The terms were very complicated, and the offers that were made to different airlines were very different,” Sinclair said. “The discounts were arbitrary. There wasn’t a calculation to them that we saw.”

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