The situation in Venezuela is expected to get worse before it gets better. While that view extends across many industries, this week’s IATA Annual General Meeting sees the aviation sector in focus and the situation is ugly. IATA’s Regional VP for Americas, Peter Cerda, spoke to the issues during a briefing on the eve of the main meeting in Cancun, highlighting Venezuela’s troubles as among the list of challenges the industry faces in Latin America.
The $3.8 billion in foreign currency trapped in Venezuela is a major problem for the airlines that operate there. Between the difficulties in getting money out and the ever worsening civil unrest in the country more airlines are choosing to walk away completely. The latest to make that decision is United Airlines, which will halt operations in Venezuela as of 1 July. It previously adjusted its schedule to have crew overnight in Aruba rather than in Caracas to address the safety concerns, but the economics remain a massive challenge.
IATA has been pressing the issue for years now but little progress has been made in helping foreign carriers repatriate their monies. Cerda describes the group’s efforts as ongoing but hamstrung by the Venezuelan government’s focus on other areas. “The industry is trying to be sympathetic. Airlines don’t want to pull out of Venezuela. But we are getting to a point where airlines need to make business decisions. We continue to advocate with the government to try to find solutions… But unfortunately at this time we have not reached common ground between the government and the industry.”
Ultimately, this is likely to see the nation further isolated from the global community. Air connectivity brings economic value, cultural exchange and theoretically greater potential for the dictatorial regime to be toppled. Cerda’s view is that more cuts in airline connectivity will come before any notable growth is realized. “Slowly, unfortunately, Venezuela is finding itself more cut off. I don’t believe they’ll be fully cut off but connectivity will be focused on limited markets only. We can’t predict the future but I think it will get worse before it gets better,” he says.
Separately, in Mexico the main concern for IATA is a piece of legislation that, if passed, would apply a number of changes to the way airlines operate. Among the specific changes, passengers would see mandated compensation for flight delays; a guaranteed checked baggage allowance as part of wholly domestic fares; and allow non-sequential coupon use for tickets (i.e. legalizing throw-away ticketing and breaking the market-based fare structure that has existed for decades). IATA believes these changes would “have a significant impact on the Mexican economy, traveling public, and puts Mexican carriers or those operating to [Mexico], at a disadvantage.”
Undoubtedly the complexity of understanding different rules in different jurisdictions is a challenge for travelers. Dismissing such regulations as bad for consumers, however, tells only part of the story.