ANALYSIS: Airlines cut capacity to Venezuela even as currency crisis thaws

Washington DC
This story is sourced from Pro
See more Pro news »

Scheduled international capacity to Venezuela is down 12.4% year-on-year in April, driven by cuts planned by foreign carriers to the South American country in recent months.

Airlines plan to operate 15% less flights on international routes originating from cities in Venezuela in April compared to a year ago, data provided by Innovata shows. The number of seats on such routes are 9.2% lower year-on-year.

Venezuela indicated in recent weeks that it would repatriate $3.8 billion owed to foreign carriers after airlines went for months without payments. The trapped funds has led to many foreign airlines scaling back operations or in some cases, nixing routes altogether. Air Canada announced in March it would suspend flights on its Toronto-Caracas route.

While Venezuela's recent move has brought some relief to carriers who have had revenue trapped in the country for months, scheduled capacity on international routes originating from the country in April was still down year-on-year. Overall, airlines will operate 287 fewer flights and offer 26,000 fewer seats during the month, Innovata's data shows.

Besides Air Canada, other major carriers that will cut capacity include Avianca, LATAM Airlines Group, Aeromexico, Iberia and Lufthansa, Innovata's data shows.

Capacity on Avianca's Caracas-Bogota route is down 63% year-on-year in April, for example. Aeromexico will slash available seat kilometres on its Caracas-Mexico city by 42.4%, while LAN will reduce capacity on Caracas-Lima by 64%. Capacity on Lufthansa's Caracas-Frankfurt flights is down 46.6%, and Brazil's TAM will reduce capacity on its Caracas-Sao Paulo route by 61.1%. Iberia is cutting capacity on its Caracas-Madrid route by 40.3%.

asset image

Venezuela's hold-up in repatriating funds has attracted some strong words from airline chiefs. "The [Venezuelan] government thinks you are obliged to provide service and not get paid for it. It's as simple as that," Avianca's owner German Efromovich told delegates at the IATA Wings of Change conference in Santiago recently. He added that while Avianca would try to continue operations to Venezuela for as long as it could, it would ultimately have to answer to its shareholders.

While many major foreign airlines are reducing capacity to Venezuela, some carriers like Panama's Copa Airlines or Curacao-based InselAir plan to keep capacity flat or even increase available seat kilometres. InselAir's chief executive Albert Kluyver tells Flightglobal the carrier has no plans to pull down capacity, adding that it does so only based on seasonal demand. Copa's chief executive Pedro Heilbron tells Flightglobal the airline is not making drastic changes to its Venezuelan capacity. "Things remain the same over there," he says.

Compared with most foreign carriers, Venezuela's airlines largely plan to increase capacity in April. Conviasa, for example, plans to more than double capacity on its Caracas-Bogota flights, Innovata's data shows. Avior Airlines, another Venezuelan carrier, will grow capacity by 30% on its Barcelona-Panama City route.