Latam Airlines Group SA, Latin America's largest carrier, said Monday that it will become the latest airline to cut all flights to Venezuela beginning in August. A day earlier, Deutsche Lufthansa AG says its three weekly flights to Caracas will be halted in June "until further notice."
The Chile-based LATAM Airlines says it had already suspended flights from Sao Paulo, Brazil and would suspend flights from Lima, Peru, Guayaquil, Ecuador, and Santiago, Chile by the end of July. Lufthansa, one of Europe's largest airlines, is set to stop all flights to the country beginning on June 17. Andreas Bartles, the German airline's spokesman, said there were two major reasons for the decision. Namely, repatriating revenue from the South American country due to currency controls, and a sharp drop in ticket demand, particularly among business travelers.Because of the troubled conditions in the country, it is increasingly difficult to fill flights. Airlines have also struggled for years to transfer profits out of Venezuela, where billions of dollars are reportedly trapped in the local currency of bolivars. The currency is difficult to convert, as it uses a complicated multi-tiered exchange rate. LATAM highlighted the dire economic conditions in the country as their major reason for cutting flights, but expressed hope that they could resume once the situation improves.
"The companies of the Latam group consider Venezuela to be a relevant market and will work to reestablish operations as soon as global conditions permit," the company said in a statement, according to Bloomberg.
The news comes at a time of severe economic and humanitarian crisis in Venezuela, now in its third year of deep recession. The economy of Venezuela is heavily dependent on its massive oil reserves, and years of low oil prices have wreaked havoc on the economy, according to CNN Money.
"And fewer flights on Venezuelan runways is far from the country's only problem. The economic crisis has spurred food rationing, medicine shortages, and mass unemployment. The International Monetary Fund expects unemployment to hit a staggering 21% next year. The government has ordered rolling blackouts to conserve power, and employees in the public sector are working only two days a week."Lufthansa and LATAM are not the only airlines to cancel flights to the country. American Airlines Group Inc announced in March that it was cancelling its weekly flight from Caracas to New York just three weeks after reinstating it. The flight was originally cancelled due to low demand. The U.S.-based Delta, as well as Air Canada and Alitalia, have also made plans to suspend, or at least reduce, flights to Venezuela.
Companies seem to be leaving Venezuela at a rapid pace. Coca-Cola recently announced that they were stopping production of their famed beverages in the country due to a shortage of refined sugar. Grim things may be on the horizon if something isn't done to stabilize the economy, as Bloomberg noted.
"Lufthansa hopes to restart the routes pending improved conditions in the country but is skeptical flights will return soon, Bartels said. The company is owed more than $100 million from Venezuela, Reuters reported on Monday. Venezuela's economy is projected by the International Monetary Fund to contract by 8 percent in 2016, with the average rate of inflation expected to surge to almost 500 percent."Lufthansa's flight was the last remaining flight between Germany and Venezuela. U.S. intelligence has warned of a possible "palace coup" or even military uprising against the government of President Nicolas Maduro. The country is struggling to avoid a default on its debt, and said that it would cut imports to $20 billion this year, down from $37 billion in 2015, to free up funds to continue paying off its debt.
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