Gol Suspends Venezuela Service On Currency Dispute

February 9, 2016

Brazilian airline Gol has suspended operations to Venezuela's capital Caracas until it can settle a dispute over the transfer of money out of the country.

The money is being held in Venezuela under the country's strict currency controls, a system that has led other airlines to take write-downs on Venezuelan operations or suspend ticket sales and service to the country.

Airlines have USD$3.9 billion of resources trapped in Venezuela, according to IATA. The government requires all tickets to be sold in local currency but makes it difficult for the airlines to convert that local revenue into dollars.

The Venezuelan Bolivar though has been shrinking, reducing the foreign currency value of the local ticket sales.

"Gol temporarily suspended its operations in Caracas, Venezuela until the issue of repatriation of company resources in the country is resolved," a statement said. "Clients affected are being re-booked on other airlines and receiving all necessary assistance."

Gol gave no estimate as to how long negotiations with the government over the transfers or how long the suspension will last.

Gol has BRR351 million Brazilian reais (USD$90 million) trapped in the country according to Exame, a Brazilian newsweekly magazine. It has suffered four years of deep losses exacerbated by falling demand and a strong dollar that has driven up the Brazilian currency cost of dollar-denominated fuel, debt and lease payments.

Venezuela's currency controls currently disburse dollars for 6.3 bolivars to the dollar for preferential goods such as food and medicine, but also use less advantageous rates including 12 and 200 to the dollar for less important products.

On the black market, US dollars fetch 1,016 bolivars - an 81 percent depreciation from a year ago when dollars sold for 187 bolivars.

(Reuters)