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American Airlines further isolates Venezuela

The airline announced it will cut services to Venezuela over unpaid debts. There are signs Venezuela is taking steps to prevent more airlines and foreign companies from doing the same.

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Rafael Moreno/AP/File
An American Airlines plane sits on the tarmac at Simon Bolivar International Airport in Maiquetia, Venezuela, January 2007. American Airlines said Tuesday, June 17, 2014 that it will cut nearly 80 percent of its flights to Venezuela in a dispute over unpaid debts.

American Airlines’ decision this week to cancel most of its flights to Venezuela could embolden more firms to quit the South American nation until the socialist government repays its billions of dollars in foreign debt.

“This isn’t the first airline to say it’s cutting back on service, but it’s certainly the biggest,” says our correspondent in the Venezuelan capital, Caracas. “This will send a big signal to the government about what’s to come.”

The oil-rich but economically troubled South American nation owes nearly $4 billion to foreign airlines, including $750 million to American Airlines. Amid an impasse over how to repay the debts, American Airlines announced Tuesday it will stop servicing flights between Venezuela and New York, Dallas, and Puerto Rico starting July 2. Of the carrier’s 48 current weekly flights, only 10 will remain from Miami.

But there are also signs that President Nicolás Maduro’s government is taking proactive steps to prevent more airlines and foreign companies from curtailing business with Venezuela.

Following American Airlines’ announcement, the government announced a significant cabinet reshuffle in ousting Planning Minister Jorge Giordani – a longtime ally of the late President Hugo Chávez – and making room for more pragmatic economic decisionmaking under Vice President of Economy Rafael Ramírez. Only days earlier Mr. Ramírez told investors in London that Venezuela needs to unify its three official foreign exchange rates that Mr. Giordani helped split up.

“A lot of analysts are saying this might open a venue for the pragmatists,” says our correspondent.... For the rest of the story, continue reading at our new business publication Monitor Global Outlook.

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