Caribbean News Now!

About Us Contact Us

Countries/Territories

Jump to your country or territory of interest

Advertise with us

Reach our daily visitors from around the Caribbean and throughout the world. Click here for rates and placements.

Contribute

Submit news and opinion for publication

Subscribe

Click here to receive our daily regional news headlines by email.

Archives

Click here to browse our extensive archives going back to 2004

Also, for the convenience of our readers and the online community generally, we have reproduced the complete Caribbean Net News archives from 2004 to 2010 here.

Climate Change Watch

The Caribbean is especially vulnerable to rising sea levels brought about by global warming. Read the latest news and information here...

Follow Caribbean News Now on Twitter
Connect with Caribbean News Now on Linkedin



News from the Caribbean:


Back To Today's News

Airlines not the only ones affected by Venezuela currency controls
Published on July 10, 2014 Email To Friend    Print Version

dollars_bolivars.jpg
Photo: venezuelanalysis.com

By Caribbean News Now contributor

CARACAS, Venezuela -- Venezuela’s arcane system of multiple exchange rates and currency controls is making life difficult not just for airlines but also for other multinational companies doing business in the South American country.

Armoured car company Brink’s could see some $400 million in revenue disappear this year from its operations in Venezuela, if its sales are recalculated at the recently created exchange rate of about 50 bolivars to the dollar instead of the primary rate previously used for accounting purposes of 6.3 bolivars.

If the devalued exchange rate had been applied to last year’s Venezuela revenues, the company said, they would have shrunk by 88 percent and the operating profit for the entire company would have fallen by 31 percent.

Procter & Gamble announced in April that it had the equivalent of about $900 million in cash in Venezuela and that it was taking a $275 million write-down as a result of applying the government’s intermediate exchange rate to its Venezuelan balance sheet. Coca-Cola said that its Venezuelan subsidy took charges of $247 million related to "the devaluation of the Venezuelan bolivar." Merck reported $140 million in exchange losses in Venezuela during the first quarter and Ford has written down about $316 million.

Further complicating matters, the Venezuelan government has not allowed companies to repatriate profits for the last five years.

Meanwhile, Air France KLM became the latest airline to sound the alarm over service to Venezuela. The airline predicted weaker earnings this year due to, among other things, "the challenging situation in Venezuela."

On Monday, Delta Air Lines announced that it is reducing service to Venezuela by 85 percent amid a dispute with the government over unpaid revenue. The carrier’s daily roundtrip flight between Atlanta and Caracas will be replaced with one roundtrip weekend flight as of August 1.

The decision by Delta was the latest in reductions in airlift to Venezuela by international carriers, who have so far rejected the government’s offers to repatriate revenue delayed by local currency controls.

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

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 move 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 and has reduced its daily Frankfurt-Caracas service to three weekly flights.

“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.”
 
Reads: 2699





Click here to receive daily news headlines from Caribbean News Now!



Back...

Comments:

No comments on this topic yet. Be the first one to submit a comment.

Back...

Send us your comments!  

Send us your comments on this article. All fields are required.

For your contribution to reach us, you must (a) provide a valid e-mail address and (b) click on the validation link that will be sent to the e-mail address you provide.  If the address is not valid or you don't click on the validation link, we will never see it!

Your Name:

Your Email:

(Validation required)

Comments:
Enter Code



Please note that, if you are using an AT&T domain email address, e.g. att.net, bellsouth.net, sbcglobal.net, the verification email will likely not be delivered. This is outside of our control and the only remedy seems to be for readers to complain to AT&T





Disclaimer
User comments posted on this website are the sole views and opinions of the comment author and are not representative of Caribbean News Now or its staff. Caribbean News Now accepts no liability and will not be held accountable for user comments.
Caribbean News Now reserves the right to remove, edit or censor any comments. Any content that is considered unsuitable, unlawful or offensive, includes personal details, advertises or promotes products, services or websites or repeats previous comments will not be approved.
Before posting, please refer to our Terms of Use and Privacy Policy.



Other Headlines:



Regional Sports: