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 get paid."
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 devaluation.
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 Venezuela flights.
Ezequiel Minaya contributed to this article
Write to Jack Nicas at jack.nicas@wsj.com
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