OREANDA-NEWS. Venezuela's air transportation sector has been operating on the basis of US dollars since mid-2014, allowing foreign carriers to sustain profits and even increase the frequency of some routes despite a longstanding impasse with the government over trapped revenue.

About 23 foreign carriers still have a combined $3.7bn of locally generated revenues trapped in Venezuela, compared with almost $4.3bn in June 2014, the local commercial airlines association (Alav) tells Argus. The $600mn reduction in trapped revenues over the past year reflects partial payments by the government to several smaller carriers. It's unlikely the government and airlines will make progress this year lowering the amount given Venezuela's worsening economic crisis, now in its third consecutive year with triple-digit inflation and an imploding currency.

Foreign carriers successfully contained the rapid growth in locally trapped revenues by both requiring international air travel from Venezuela to other countries be paid for in dollars and cutting the frequency of weekly international flights — from 352 flights at the end of 2013 to 169 flights by the end of 2014.

While these measures enabled foreign carriers to maintain their reduced operations, Venezuelan-based travelers paying for tickets priced in bolivars have seen their costs soar by 600-1,000pc in the past year. Currently it's "almost impossible anywhere in Venezuela" to buy an international flight ticket priced at a government-set exchange rate and pay for that ticket in bolivars, a senior official with the national travel and tourism agency association (Avavit) tells Argus.

Avavit's members nationwide accounted for about 80pc of the roughly 1.6mn international air travel tickets sold locally in 2014, a year that saw a 50pc collapse in ticket sales compared with 2013 sales of over 3.2mn tickets. But international ticket volumes booked through Avavit's members were 85pc lower in first-half 2015 than the same period in 2014. Alav estimates that about 550,000 international flight tickets were booked in first-half 2015.

Avavit and Alav agree that international air ticket sales in 2015 likely could total about 1.2mn overall, mostly transacted in dollars directly through airline websites that accept only credit and debit cards from non-Venezuelan banks. Foreign airlines also have sharply restricted tickets available for sale through local travel agencies.

"The few air travel tickets sold in bolivars will be sold at the black market exchange rate or there won't be any seats available," the Avavit official said.

Venezuela's black market rate currently averages Bs630/$ compared with the government's three-tiered exchange system of Bs6.30/$, Bs11/$ and a floating but access-restricted rate of Bs199/$.

In contrast, the government-set average monthly minimum wage of some Bs7,000 is about $11 or about a half-percent of a $2,000 round trip air ticket from Caracas to Miami.

The transportation ministry maintains that international air travel is not a dollarized market.

"The sale of international air travel tickets in Venezuela at prices based on the black market exchange rate is a serious crime punishable with imprisonment," a senior transportation ministry official tells Argus.

No foreign carriers and local airlines offering international flight services so far have been found to be ignoring the government's regulations on local ticket sales, the official said.

While the Venezuelan market for international air travel has become prohibitively expensive for most residents without offshore savings, it has become somewhat of a boon for the airlines. Foreign carriers added a combined 20 new international weekly frequencies during first-half 2015, reflecting stronger demand to destinations like Panama, Miami and Bogota, according to Alav.

Total weekly frequencies from all airports nationally were 189 flights as of 30 June compared with 169 weekly frequencies at the end of 2014 and 352 weekly flights at end-2013, Alav said.

Colombia's Avianca doubled its Caracas-Bogota frequencies in April to twice daily, while Panama-based Copa added a third weekly Caracas-Panama flight.

American Airlines said it would reinstate five weekly Caracas-New York flights from mid-December. This route had been suspended since June 2014 as the US carrier pressed Caracas for the release of almost $900mn in trapped local revenues.

Some carriers like Aerolineas Argentinas, with some $50mn trapped here, are finding creative ways to whittle down the cash they have trapped in Venezuela.

Aerolineas argentinas now is using Venezuelan airports as hubs to transport travelers from South America through Venezuela to other nearby destinations in Central America and the Caribbean, a local Aerolineas Argentinas official said. These flights are "fueled, crewed, cleaned, supplied with meals and other flight services" through Venezuela, allowing payment in bolivars from the locally trapped revenues, he added.

Avior, a privately owned Venezuelan carrier based at Barcelona airport in Anzoategui state, announced plans on 17 April to invest $150mn to acquire 12 used Airbus and Boeing aircraft with the goal of expanding its international flight operations to South American, Europe and North American destinations.