Venezuela hangs on to airline cash

MIAMI: IATA says its member airlines are now owed US$4.1 billion by the Venezuelan government of president Nicolas Maduro.

With an agreed repatriation of just 10 percent of that figure, U.S. airlines increasingly have cut services to the country. IATA says international capacity to and from Venezuela is down 49 percent from peak service levels offered last year and 36 percent lower year-on-year.

Delta Caracas "Airlines cannot offer service when there is no certainty of payment. The Venezuelan government has made many promises to abide by its obligations. But $4.1 billion remains unpaid. Confidence in the market is falling sharply. Most carriers are limiting their risk with reduced capacity. Several have completely pulled out. Venezuela risks becoming disconnected from the global economy," said Tony Tyler, IATA's director general and CEO.

One reason for Maduro's lack of cooperation could be his government's lack of cash.

Despite estimated oil reserves of 298 billion barrels, Venezuela's post-Chavez economy saw inflation rise 62 percent in the past 12 months to June, and there is a reported shortage of basic goods, food and medicine.

In July, Maduro signed a deal with China to borrow US$4 billion against more oil production. China has provided the country with $40 billion in cash-for-oil since 2008.

According to corruption watchdog Transparency International, Venezuela has one of the highest levels of perceived corruption in the world due to the lack of independent institutions able to monitor the government's activities.

IATA says it has now asked Maduro to lead a "high-level dialogue" with the 24 airlines who are owed money - including US$290 million to Air France-KLM.

"Venezuela, like all nations, reaps enormous benefits from air connectivity. Air transport is a catalyst of economic growth and is a critical component of Venezuela's economic well-being and a vital link to the global economy. Air transport could also play a significant role in the Venezuelan economic recovery. Without robust air links to the world, there is little chance of a recovery," added Tyler.