Why Airlines Hate Venezuela

If you happen to live in Venezuela and want to fly out of the country, good luck. Thanks to truly terrible government policy, it’s becoming increasingly difficult to get a ticket out of town. While most airlines continue to fly to the country, one has pulled out. And the situation isn’t likely to get any better.

Airlines Hate Venezuela

I’m focusing on the US in this post to try to simplify a very complex situation, but this is a problem for airlines in every country. Though political relations between the US and Venezuela haven’t been good for a long time, airlines have continued to fly between the two quite often. It’s a huge market for American, in fact, with multiple daily flights to Caracas from Dallas/Ft Worth, New York, Miami, and even the all-but-abandoned San Juan. American also has a daily Miami to Maracaibo flight. Delta and United both have daily flights from Atlanta and Houston respectively.

You would assume that other than visiting friends and relatives (a big business especially to Florida), oil must have a lot to do with the success of these flights since that’s really the only thing keeping Venezuela from failing. While that’s probably true, even oil is on the decline in the country. In fact, it’s the overall economic problems of Venezuela that have created quite the crisis, and the airlines are paying for it to the tune of $3 billion so far. That’s the amount of money that Venezuela currently owes to airlines around the world, and there doesn’t seem to be an adequate solution in sight.

Venezuela has really strict currency regulation. When airlines (and other businesses) sell anything in Venezuela’s currency (which since 2008 has been the bolivar fuerte), the government is responsible for converting that to the company’s native currency and delivering the funds. They’ve kind of stopped doing that and instead have just been sitting on (or spending) the money for months.

You would think this would be a real problem for many airlines, but it’s worse for those who sell to a lot of Venezuelans. If United, for example, is selling tickets in US Dollars to anyone, then there is no issue getting the money. It’s just tickets sold in the Venezuelan currency that are being held hostage. And that may very well be why most airlines continue to fly there… they make enough in dollars (or euros, or whatever) to justify the flying. But not every airline feels that way.

TAME in Ecuador became the first to suspend flights. I can only assume it was more exposed to these currency issues with more people buying in bolivars. But if things don’t improve, other airlines will have to think about doing the same.

For its part, the government has been trying to negotiate a deal where they pay the airlines with a mix of cash, bonds, and jet fuel. If that sounds desperate, it’s because it is. Venezuela’s foreign cash reserves have dwindled and there isn’t much hope for that changing. To try to reverse this pain, Venezuela has made some policy changes that are going to make things even worse for airlines. It seems like a short-sighted way to try to right the ship, but it’ll have the opposite effect.

The bolivar is pegged to the US Dollar at rate of 6.3 to 1. However, the official exchange rate doesn’t reflect reality. People selling dollars on the black market can get 10 times as much because nobody wants to hold bolivars.

That black market has created quite an opportunity for Venezuelans who can travel outside the country. If you’re Venezuelan, you could buy a plane ticket to the US at the 6.3 rate. Once you got there, you could use your Venezuelan credit card to buy up to $2,500 worth of stuff and you could pull out $500 in cash at the same 6.3 rate. Take that back to Venezuela and you could make a tidy profit on the black market, possibly even paying for the trip.

To stop that, Venezuela has made two changes. First, if you go to Florida, the most popular US destination, you can now only charge up to $700 on your card and take out $300 in cash per year. That’s a huge cut.

Second, the exchange rate for purchasing travel with bolivars has abruptly changed. For air travel purchases, the rate is now tied to this strange secondary rate that is determined at weekly auctions. At last check, it was somewhere between 11 and 12 bolivars per dollar.

The upshot is this. Let’s say American wants to get $1,000 for a roundtrip ticket from Venezuela to Miami. Up until recently, it had to charge 6,300 bolivars. Now all of a sudden, it has to charge somewhere north of 11,000 bolivars. Demand should drop precipitously if people are even allowed to buy tickets at all.

For now, airlines have pulled availability tight regardless of where it’s being sold. Delta appears to only be selling full fare coach (around $3,000 from Atlanta roundtrip) while American seems to have pulled availability entirely. I assume this is temporary until there’s more confidence in this market.

As long as there’s enough demand outside Venezuela for travel into the country, airlines will likely keep flying there in some form, but I have to assume it’s becoming increasingly difficult to justify it.

[Original TAME photo by Sylvain2803 (Own work)/CC-SA 3.0 via Wikimedia Commons]


42 Responses to Why Airlines Hate Venezuela

  1. David says:

    If someone based in Venezuela on the Internet wants to buy a discounted round trip ticket Caracas-USA-Caracas, what are the rules that a US based airline must follow to issue a ticket ? Must it be issued by the airline’s Caracas office and paid for in bolivars ? Or can the airline charge the credit card in offshore US$ and issue the ticket from a US based office ?

    If someone in the US pays US$ with a US based credit card, why will Delta sell only a full fare round trip and not a discounted fare ?

    • David says:

      More to the point, why are AA not selling US originating round trip tickets at all ?

    • CF says:

      David – Well if they have a Venezuelan credit card, I think it will have to be charged in bolivars considering govt rules (though I could be wrong). But if they somehow have a card that’s not from Venezuela, then they could. Or if they have dollars, they could pay without a credit card entirely.

      As for AA not selling tickets, they’ve loosened it up again. I think it was just a hard stop because of the currency issue. That was the easiest way to make sure they could handle it. Availability is open again today.

      • Jorg says:

        My fiancée is Venezuelan, so I’ll try to clarify some things here.

        First of all there’s a new law that disallows the purchase of tickets in Venezuela that do not have Venezuela as origin. I used to buy my tickets AMS-CCS-AMS at a travel agent in Venezuela and paid her when I got there (she’s a friend, that helps ;) ). This did mean the prices went down with 90%. But not possible anymore.

        If you have a Venezuelan CC, they charge you in BsF. Should you have an international CC, you’d be very very dumb to use that one to buy the ticket. Better pay in cash BsF, then travel to the US/Europe, get cash and go back to Venezuela. That would give you so much more money.

  2. Dan says:

    Cranky,

    What is it with South American currency issues? I just got back from Buenos Aries, and they also have a black market for USD. My domestic $500 plane ticket dropped to about $320 or so by converting cash on the black market into local currency.

    • I don’t think it is just South America. When I went to Beijing in 1993, there were two parallel currencies- Yuan for foreigners and Yuan for the Chinese. The Yuan for foreigners were worth much more than the Yuan used by locals. I think it was because the Yuan for foreigners were more readily traded for USD.

      • Arcanum says:

        My brother works in China and is paid in Yuan. Before he comes home he takes it out in cash and trades it for USD at a nearby convenience store at a very favourable rate (better than the interbank rate). Apparently it has something to do with money laundering on the Chinese side.

    • CF says:

      Dan – It’s more about poor governance than geography. Both of these countries are in weak economic states and their currencies are in bad shape. That always creates opportunity.

      • Jorg says:

        Add the fact that they limit the purchase of foreign currency. In Venezuela, as you wrote, you can only buy a limited amount per year. If you need more, there’s only one way: the black market.

  3. I had read some airlines stopped selling tickets in Venezuela, but were still selling tickets outside the country. Sad that forgein travel/trade is important to a country, and what Venezuela is doing right now seems to be hurting that. But who knows, maybe in the long run it will makes things better there.

  4. Juan C. Forero says:

    Venezuela is becoming more and more like Cuba. For a Venezuelan to fly out of there (not likely back), that person is going to have a relative or friend outside the country buying the ticket… sending toilet paper, and many other commodities… Venezuela is really going down hill for the last 14 years. Ok, ok Venezuela will use the government owned and run airline CONVIASA to let the people with ties to the regime travel to the US to get all the goodies they don’t get at home. I just saw two CONVIASA Embraer 145 at an FBO in FLL, potentially a charter service for govenrment officials.

  5. Sanjeev M says:

    The reason Venezuela and Cuba are so expensive is that there is severe undercapacity and tons of demand.

    For instance if Cuba opens up, you can be sure that American Airlines will pull mainline planes ASAP away from all over the network to operate MIA-HAV shuttles every 30 min from 6am to 11pm (exaggeration). Similarly there’s a lot more need for capacity to Venezuela. Until then there are enough people willing to pay the full-Y fares.

  6. Carl says:

    The issues in Venezuela are a hell of lot deeper than those affecting the airlines. Basically the government has systematically ruined the economy, ruined their oil industry, and destroyed or privatized most larger private businesses. It cannot end well, and the currency issues are a canary in the coal mine. The government maintained its grip on power by giveaways to the electorate. For a long time the oil wealth funded the giveaways but the government wanted more, more, more and also put cronies in charge who destroyed the oil industry. Now they have run out of money but they are still giving away. The country will go bankrupt or maybe it already is.

  7. Arubaman says:

    Trust me, the demand is being driven almost completely by the black market in $USD. And the Venezuelans are VERY creative and corrupt in evading the dollar limits when returning to Venezuela. There is a real estate bubble here in Aruba with Venezuelans trying desperately to get their ever-devaluating Bolivars OUT of Venezuela to exchange them for something of real value.

  8. Venezuela will remain a commercial (and crime) disaster zone until there is a real political change. Currently the Cuban security forces that help the Venezulean government remain have their hands full. At some point, when the government feels power slipping major violence will start and perhaps a civil war. The hand outs to the poor, which was a trade mark for Chavez to buy votes, can only continue on a dwindeling scale with the current government. No telling what this ex-bus driver president will do when things really get desparate – and they will. If he is smart (and he isn’t) he would leave while he can on a one way ticket to Havana. Air travel is of secondary importance in the big picture and just a sign of things to come.

  9. David says:

    Thinking Venezuela might be a fantastic place to go on holiday in 3 or 4 years time. Wait for debt default, IMF goes in, capital controls imposed, bolivar floats freely against USD, shortages of consumer goods cease, 1 year of street protests about politicians being thieves cease and country becomes stable again.

    Argentina was an absolute dream for foreigners with USD in late 2003…

    • Jorg says:

      Trust me, you do NOT want to go to Venezuela. It’s horrible. Yep, the nature is beautiful and yes, with the black market prices you’ll have the cheapest vacation of your life.

      However: crime, corruption and availability of goods are horrible. I’ve been there three times in the last two years and you can forget about leaving at night, especially being a foreigner. It’s not safe at all. People get killed over a pair of shoes, toilet paper, chicken, the list of things hardly or completely not available is long.

      It could be a great country, but thanks to the government it’s turning into hell…

      • I was in CCS many many many years ago and we were told where not to go, don’t go out at night, etc. So it seems it hasn’t changed much.

        • Jorg says:

          Unfortunately, it has changed much… Where not to go: everywhere, unless you’re with a local. At night: after 5:30p you shouldn’t be outside if not necessary.

          I’m pretty tall (6’9), blonde, blue eyes, you get the picture: they don’t see me as Venezuelan ;). For me, it’s even during the day impossible to walk on the streets alone. I need at least two people next to me.

          It’s horrible and only getting worse. Thanks to the ‘great’ government the country is a piece of sh*t.

  10. Ogi says:

    I don’t want to be terribly finicky, but bolivar should be spelled with non-cap b. It’s a currency & although it does stem from a proper name, it’s still a common noun just like the euro. :)

  11. John says:

    I just returned from vacation in Aruba. I was surprised at how full the flights were coming in from Venezuela. Tons of tourists coming to spend their money in Aruba. There were several daily flights from multiple cities in Venezuela. I couldn’t understand how so many of them could afford vacation in Aruba alongside Americans, Canadians and Dutch if their economy was so bad.

  12. JRS says:

    The airfare from Venezuela shouldn’t be too bad since Aruba is very close, that might make a difference
    in affordability, I also suspect many just want a vacation from the everyday stress of living in Venezuela.

  13. Simon says:

    American has not pulled availability, but tickets can only be purchased through certain channels (such as American city ticketing offices in Miami), and not online.

  14. DTWJay says:

    As someone who has been there 8x from 1999-2008, this doesn’t surprise me. My wife is from there and we try to go back to visit family. With kids now it is easier to have her mom come visit us here in the States then us go there for only 1-2 weeks tops.

    We have several cousins who were able to buy our tickets on American Airlines either for us to travel and we pay them in dollars when we get there or even a ticket for my mother in law. In fact I mentioned to Brett last week via email that we had a cousin buy her a ticket on AA from CCS-DTW with 1 stop in MIA for just under $700 USD. The same flight we were going to buy (same flights/dates/etc) on AA.com was just shy of $2,000 due to currency conversion.

    I have to admit, that Brett did his homework on this and had one of the best explanations of what is happening in Venezuela with the currency issues and how it effects airlines. There is a large company there Polar that is like the Budweiser here in the states. They have beer, soft drinks, etc. The government owes them over $400 million dollars. So many companies have fled to neighboring Colombia for better business and political climate.

    • Jorg says:

      Did you hear the problems with Harina Pan? The government shut down their competition and posted a ban on importing food.

      Harina Pan couldn’t cope with the huge demand (every morning you need to eat 6 arepas at least ;) ) due to the lack of competition. Their factories in Colombia could produce more, but couldn’t send it to Venezuela.

      M*duro’s reaction (even his name seems swearing to me): blaming Harina Pan for only wanting to make money in other countries. It’s much easier for me (in The Netherlands) to get it than over there. And Harina Pan is part of Polar…

      Same thing for chicken, toilet paper, sugar, coffee and so on… The country is screwed, I hope I can get my fiancee out of the country as soon as possible, before the civil war starts.

      • Crime is out of control TODAY in Venezuela. I would think that you should be more immediately concerned that your fiancee escapes before something worse can happen to her.

        It could be very bad for her BEFORE the civil war. Everyday she is there is a risky gamble. Good Luck!

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  16. Carol C says:

    This blogger creates quite an eclectic and complicated explanation and apology for US Imperialism. The reason for the high prices and non existent flight results have everything to do with Venezuela refusing to sacrifice it’s population and industry to the billionaires of the United States. The US wants to engulf Venezuela like they have the rest of the world into their playground and exploit their people an resources. Venezuela’s government tis not having that! So the US is disciplining Venezuela by making it too expensive for tourists to enter. Its a mild version of the Cuban Boycott. Remember it is the US airline holding company investor class that are getting rich off of passengers. They are the exploiters not the Venezuelan government!

    • Consumer Mike says:

      Dear Carol C, It appears to me that you have been watching too much Government TV. Time for you to talk to your neighbors and look at the street demonstrations. Your posted opinion echos the voice of the current regime in Venezuela.

    • Daniela Weiser says:

      Carol,
      Your statement only shows ignorance. The writer accurately described what’s happening in Venezuela regarding unpaid debts and black market currency exchange. Since Chavez took power in 1998 the economy of the country has gone down the drain. Even though the price of the oil barrel has been at its highest in history, Venezuelan are experiencing empty shelves in the supermarket, no real infrastructure growth and the level of insecurity is frightful.
      I am Venezuelan. I am lucky to reside in the US now, but my parents are still there. I hear my mother’s anxiety and feel the tension they are living with everyday. The fear of going out into the streets and fear for their financial future in this unsustainable economical crisis.
      Please I beg you stop promoting this erroneous ideas about the USA trying to control Venezuela. If that was the case I think the US would have intervened a long time ago. There is no imperialist plot to overthrow the government, there is no US lead or Colombian infiltrates trying to propagate a coup. There are Venezuelans asking for security, food, financial stability and democracy. These people are my mother, my father, my aunts and uncles, my aging great aunt and my young cousins. They are not imperialist, fascists or terrorist. They are Venezuelans that don’t want Venezuela to become a communist country like Cuba. Please inform yourself better before making statements that are false and only promote more people dying and being repressed.
      Also I wanted to thank all other people who have written here supporting Venezuela. I am sorry that some of you who are married/engaged/dating a Venezuelan might never get to see the beautiful country I love. My American husband refuses to go there in the current conditions. Because of that he’ll never meet my family who remains there. I don’t blame him for being afraid to go there. How can I blame him when he hears it from my parents directly about how bad it is. So for those of you who were talking about cheap tourism to Venezuela: good luck! I hope you make it back alive, with all your money and dignity. Venezuela used to have a tourism slogan back in the 90s: “The best kept secret of the Caribbean”. It really was, so beautiful and welcoming. Right now I would call it “The best death wish of the Caribbean”.

      Quoting Mark Twain : “Loyalty to country ALWAYS. Loyalty to government, when it deserves it.”
      Please believe me Carol when I tell you this government does NOT deserve it.

      • Consumer Mike says:

        Daniela, It just occurred to me that fom the flavor of the comments from Carol C it just may be that 1) she may have gone to Cuba to be educated, 2) She is Cuban, 3) Currently is employed by the Venezuelan government or 4) Remains one of those Chavez fanatics who truely believes the lies, propaganda and stories generated by him and his bus driver successor.

        Obviously her opinion cannot be taken seriously and her misinformation is an attempt to support the current regime.

        • Daniela W. says:

          It could be any of those possibilities. Ever since a few American celebrities like Sean Penn and Danny Glover decided to support Chavez and his socialist/communist “revolution”, I find myself having to explain to liberal democrats that what’s going on in Venezuela is not a democracy. It is sad that just because Chavez called Bush the devil, then suddenly liberals thought he was great. How mistaken they are. I consider myself a liberal, and I actually happen to work in the arts, theatre to be specific ie. very liberal), and I would rather have Bush in charge a thousand times over Chavez and or Maduro.
          So I sometimes fear that Americans who would in normal circumstances not support a government like this are fooled by media news and the constant lies and manipulations that come from the one-sided-govenrment controlled media outlets.
          So for that reason I give her the benefit of a doubt, and I can only hope she will open her eyes and clean her ears. It is so clear to all of us who opposed Chavez (and by default Maduro) that they would do whatever it takes to stay in power, because the moment they loose control they all will be tried for crimes against humanity. I always explain it this way: You as an American would not trust your politicians blindly. You will expect some sort of check and balances and accountability. So why would you go and blindly trust another politician, from a foreign country, foreign culture, who has managed to eradicate any forms on control and who now publicly states that he does not have to answer to anybody.
          That’s my 2 cents. Thanks again to all of you reading this blog who support Venezuela.

          • Jorg says:

            I think your replies are the best I’ve seen in the last couple of years about Venezuela. It’s hard for me to stay calm when someone is actually defending the dictatorship I’m seeing every day. In a week my fiancée will be with me, in Europe, and I can’t wait to see her fly out of that hell. Every since we’ve been dating, the country has been ‘difficult’, but these last weeks I really fear for her life. I sure hope that someone will get Venezuela out of this mess and I actually don’t care from which side (though I doubt it’ll be Maduro’s).

            • Daniela W. says:

              Thanks for your comment.
              I hope she makes it out safe and I wish you both happiness.
              The sad thing is that everyday, more and more Venezuelans go into exile. We all leave for different reasons, but we all are still in love with our country. The brain drain that Venezuela has experienced in the last 16 years will eventually take its toll in the future.

        • Rick Flowers says:

          When will this “the gringos are coming” crap ever end? It is just blatant propaganda garbage like Castro babbling about the embargo after the ungodly mess he has made of Cuba. The US buys Venezuelan oil and pays CASH $$$. It is the yanqui dollar that is feeding Venezuela at this point. Amazing how these Marxist intellectual idiots manage to spin everything to make it someone else’s fault. We give the Venezuelan government billions of dollars, they don’t pay the airlines what they are owed, the airlines leave, and it’s our fault! The first airline to leave was from Ecuador-spin that.

          • Efrhen Gallego says:

            Hey I am Venezuelan and what you just said makes a lot of sense. Tha US ia very convinient scapegoat for everything that goes wrong I a dictatorshi like ours. If Food is scarce or the power goes out It is a CIA or Political oponents fault. We hear the crap every week but hardly anybody believes it any more

  17. Rick Flowers says:

    The whole chavista revolution is just a “pardos” VS “Mestizos/Blancos” thing at the roots. It is based on a hatred of anyone with European blood or who merely looks European. Communism (socialism-same crap) is just an ideology that has learned to exploit the inherent race and class hatred in Venezuela to gain power. Venezuela is being destroyed by these idiots just like Cuba was. Their dream is ultimately to destroy the US and Canada. Marxist economics is a good example of something that sounds great on paper (according to the ivory tower professor types) but that makes an unbelievable mess in the real world. You will, of course, notice that none of the rich Hollywood types choose to live anywhere but the US.

  18. So DL cut their CCS flight down to one per week just recently.

    I’m also curious how airlines are limiting sales of flights in bolivars.. Are they manipulating availability of seats for sale in bolivars or something similar?

    • CF says:

      Nick – It’s pretty easy, actually. Fares can be filed based on point of sale. So they can just restrict what fares they’re willing to sell within Venezuela. Or I assume they can just not file fares at all for Venezuela point of sale.

      • Interesting.. I presume governmental relations require that they sell tickets in Venezuela, although I’m sure they’re marked up so when they end up selling the tickets they’ve got a worst case scenario on the exchange rate in mind..

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