Airlines in limbo as Venezuela’s thorny currency issues persist

The Venezuelan government is piling on ever greater complexity to its currency management scheme, which has resulted in rising consumer prices triggered by high inflation. As a result, airlines with combined outstanding funds of more than USD3 billion tied up in Venezuela are awaiting resolution concerning what specific exchange rate they'll be paid, and when. The largest foreign airlines are currently American, Copa and GOL, with a total of some 30% of international seats.

Throughout the past year Venezuela has devalued its currency on several occasions, following many currency controls levied during the past decade. The result is a dangerously low supply of foreign reserves that has forced the Venezuelan government to horde US currency, meaning airlines serving the country have had to wait in some instances more than a year for the government to transfer tickets paid in VEF to USD.

Carriers have opted to use various mechanisms to combat some of the uncertainty including cancelling or restricting sales in VEF and temporarily halting service to Venezuela. Each method of alleviating Venezuelan exposure is tricky for airlines as Venezuela remains a strategic air travel market despite the government holding airline cash hostage.