By Dow Jones Business News,
July 07, 2014, 05:45:00 PM EDT
Delta Air Lines Inc. said it would cut 85% of its flights to Venezuela next month, part of a larger exodus from the
country by foreign airlines who say the Venezuelan government owes them more than $4 billion.
Delta joins American Airlines Group Inc., Air Canada, Alitalia and several other carriers that in recent months have
eliminated or sharply reduced their flights to Venezuela amid a dispute with the Venezuelan government over their
financial holdings in the country.
If American extends its schedule reduction to August, airlines would be scheduled to fly 350 times from the U.S.,
Canada and Europe to Venezuela next month, an approximate 66% reduction from the prior year, according to a Wall Street
Journal analysis of airline-schedule data.
Foreign companies operating in Venezuela need state approval to exchange their revenues in local currency to U.S.
dollars or other currency. In recent years, Venezuelan authorities have delayed those currency conversions and now owe
international suppliers an estimated $14 billion.
The International Air Transport Association, a global airline trade group, estimates the Venezuelan government owes
foreign airlines $4.1 billion, up from approximately $3.3 billion in April.
"The airlines for a number of months have been doing their best to get the money they have trapped there out," said
IATA spokesman Jason Sinclair. "It's not a big surprise that it's difficult for airlines to operate there if they can't
Luis Gustavo Graterol Caraballo, Venezuela's air transport minister, said on Friday that "the expectation is good" in
talks between Venezuelan authorities and foreign airlines over the repatriation of the carriers' Venezuelan currency,
according to a state news release.
Meanwhile, currency moves by the Venezuelan government are further threatening airlines' holdings there.
Venezuelan authorities recently weakened the exchange rate for Venezuelan bolívares collected for international
airfares to about 11 bolívares to the dollar, compared with the previous rate of 6.3 per dollar. That change hurt
some foreign airlines' finances. Delta, for example, recorded a $23 million charge in the first quarter because of the
Venezuelan authorities have since proposed further weakening the airlines' exchange rate, partly in response to their
claims that foreign airlines are overpricing tickets to and from Venezuela. But that proposal drew outcries from
Venezuelans, who were concerned it would further drive up airfares, and the government has since delayed the change.
Mr. Sinclair of IATA said demand dictates airfares, and prices to Venezuela "have seemed high because the flights have
been full." He added that foreign airlines' service cuts have less to do with the weaker exchange rates and "more to do
with the government's unwillingness to release payments" of dollars in exchange for the airlines' bolívares.
Delta on Monday said that beginning Aug. 1 it would convert its daily flight between Atlanta and Caracas to a weekly
flight, operating on the weekends. Delta declined to say how much money it had trapped in Venezuela, but according to a
securities filing, the carrier had at least $180 million in bolívares as of March 31.
Earlier this month, American reduced its schedule to Venezuela to 10 flights a week from 48, including the elimination
of its service from Dallas and New York. As of March 31, American had $750 million in bolívares it can't get out of
Venezuela, according to a securities filing.
The cuts to air service come amid other foreign companies' cutbacks in Venezuela, leading to shortages of basic goods
from cooking oil to car parts. Those issues have helped fuel violent street protests and turn some of the public against
leftist President Nicolás Maduro.
Lufthansa AG, Air France-KLM and Spanish carrier Iberia, a unit of International Consolidated Airlines Group SA, have
also sharply reduced their service to Venezuela over the past year, while Air Canada and Alitalia have eliminated their
Ezequiel Minaya contributed to this article
Write to Jack Nicas at email@example.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
Copyright (c) 2014 Dow Jones & Company, Inc.