Venezuela Cuts Commercial Ties with Air Canada

The Venezuelan government has declared it will sever all commercial ties with Air Canada, after the airline suspended operations in the country earlier this week.

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Air Canada announced it would begin a suspension of operations this week (Reuters)
Air Canada announced it would begin a suspension of operations this week (Reuters)
By Ryan Mallett-Outtrim
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Mérida, 19th March 2014 (Venezuelanalysis.com) – The Venezuelan government has declared it will sever all commercial ties with Air Canada, after the airline suspended operations in the country earlier this week.

Describing Air Canada's decision as “unilateral”, Venezuela's air and sea transport minister Hebert Garcia accused the airline of flouting international standards on Tuesday.

“That relationship with Air Canada is over until the president decides otherwise,” Garcia stated.

Garcia's statement came in response to a statement from Air Canada on Monday that it would halt flights to Venezuela.

“Due to on-going civil unrest in Venezuela, Air Canada can no longer ensure the safety of its operation and has suspended flights to Caracas until further notice,” Air Canada stated.

According to the airline's website, it had been operating three Toronto-Caracas flights a week.

“Air Canada will continue to monitor the situation and will evaluate the re-introduction of flights with the objective of resuming operations on the route once Air Canada is satisfied that the situation in Venezuela has stabilized,” the company stated.

Air Canada's Caracas office remains open, according to the airline.

Caracas and at least five other major Venezuelan cities have been hit by a wave of deadly protests since last month. However, Garcia rejected Air Canada's official explanation attributing the suspensions to insecurity, stating the airline continues to operate in Ukraine despite civil unrest. Garcia described the situation in Ukraine as “more serious” than ongoing barricades in Venezuela.

“We regret that they have taken a unilateral decision because Canadians will surely keep coming to Venezuela,” Garcia stated.

Last week, President Nicolas Maduro warned he would take “severe measures” against airlines that reduce services.

“A company that leaves the country will not return while we hold power,” Maduro stated on Friday.

Today, Venezuela's National Assembly (AN) called on airlines to work with the government to improve services and avoid cutbacks.

The head of the AN's committee on services and administration and socialist party (PSUV) legislator Claudio Farias stated there is a “commitment” from Venezuela to avoid flight suspensions.

However Air Canada isn't the only international company to curb operations in Venezuela.

Airlines including Lufthansa, Iberia, Air Europe, Air France, American Airlines and others have reduced flights this year. According to a recent report from daily newspaper Ultimas Noticias, 11 of 26 airlines in Venezuela have at least reduced services, with some using smaller planes.

However, most airlines have cited difficulty exchanging currency through official channels as the main reason for the cutbacks. Under Venezuela's currency control regime, foreign currency can only legally be exchanged for the bolivar through a governmental institution. However, both Venezuelan and international companies have long criticised the system, complaining of transaction delays.

Last week, the Colombian based Avianca announced it would cut 73% percent of flights servicing Venezuela, including routes to Peru, Costa Rica and Colombia.

Earlier this year Avianca's president Fabio Villegas stated that difficulties with Venezuela's foreign exchange system had forced the company to make cutbacks. The airline reportedly has close to US$300 million in Venezuela. According to the International Air Transport Association (IATA), airlines have around US$3.7 billion trapped in Venezuela.

However, airlines have also been charging very high prices for tickets out of Venezuela, often closer to the illegal exchange rate when compared to their other prices. The government then owes the airlines bolivars calculated at the official rate.

Airlines aren't the only ones taking flight. Chrysler has announced that it will reduce operations this month. The company blamed difficulties importing assembly materials. Recent cutbacks at other manufacturers including Toyota, Ford and General Motors sparked protests earlier this month, with unions taking to the street to demand the government nationalise the automotive industry.