When Air Canada suspended flights to Venezuela on March 17 the airline blamed "on-going civil unrest" and said it could "no longer ensure the safety of its operation."
But the next line of Air Canada's announcement hints at what may be the more accurate explanation. The "onerous currency restrictions imposed on all airlines preventing them from recovering their funds from Venezuela" are making it impossible to do business, Air Canada says.
Twenty-nine Venezuelans have died in clashes between pro-and-anti-government protesters in recent weeks. Opponents of the hard-left regime sense their position is being weakened by the economic crisis in the country and are attempting to press the advantage with demonstrations. But the government of Nicolas Maduro retains a solid base of supporters, and they, too, are taking to the streets, reiterating his mantra that "outside forces" are to blame for the runaway inflation, severe shortages of consumer goods, electrical failures and raging black currency market.
Air Canada says the vast majority of its customers on the Toronto-Caracas route originate in Venezuela – meaning they bought their tickets in-country. But the government's currency controls mean it is almost impossible for foreign firms to get money out of the country. So Air Canada isn't getting paid for carrying most of those fliers.
The International Air Transport Association said last week that the Venezuelan government is blocking the repatriation of more than $3.7-billion (U.S.) in ticket revenue. The association isn't saying who is owed what, and Air Canada refused to put a figure on what the company is owed.
"It is not sustainable to continue operating given the current circumstances," Air Canada said in a statement, refusing to answer questions from media. The statement said the airline is "working with" the industry and government on the topic of currency controls.
Air Canada is the first major international carrier to make the decision to suspend flights to Caracas but it likely won't be the last; the suspension is part of the incremental pressure mounting steadily on the embattled Mr. Maduro.
The major Colombian airline has reduced flights to Caracas from three a week to one, and Ecuadorean airline Tame suspended its flights to Venezuela in January, saying it was owed $43-million in ticket fees – and that's a third of the company's annual revenue. Several United States-based airlines have ceased to permit purchase of tickets in bolivars, the local currency, and will accept only U.S.-dollar transactions – even though few Venezuelans can get legal access to dollars. German airline Lufthansa said recently that its 2013 financial results took a double-digit million euro hit from payment issues in Venezuela.
Air Canada, which operated three flights a week to Caracas, said it would monitor events in Venezuela and "evaluate the re-introduction of flights with the objective of resuming operations on the route once [we are] satisfied that the situation in Venezuela has stabilized."
But Venezuela's Transport Minister Heber Garcia said Venezuela had "ended its business relationship" with Air Canada and that the airline could have no role in the country until the president decided otherwise.
Speaking to reporters last week, President Maduro had warned that international airlines had "no excuse" to stop flying to Venezuela and that he would take "severe measures" against any that did.
"If an airline leaves the country, it's not coming back while we are in government," he said. Invoking a familiar explanation, he said that the airlines were part of the "economic war" being waged against his government by the private sector. Minister Garcia, announcing the revoking of the air service agreement with Air Canada, noted that Canada is a close ally of the United States, a country he said is advocating foreign intervention in the crisis in Venezuela.
President Maduro also said that the money owed to the airline industry would be paid.
"The government has indicated that they could approve some currency for current operations while having a separate discussion about the way that the debt could be repaid," Richard Obuchi, a professor of public policy studies at the Institute for Higher Studies in Management in Caracas, said in an interview. "Given the severe restrictions in currency, I tend to think that it could take a while to resolve the debt issues. It could also be the case that the government is having bilateral talks with individual companies in order to settle some kind of agreements. Some companies could prefer to cut losses until there is more clear sign that the government will assign currency to this industry. But the economic situation is going to keep its path toward further deterioration."
The Air Canada cancellation has clearly irritated the Maduro government, but in Venezuela itself it didn't cause much of stir – it isn't seen as anything as significant as a cancellation of U.S. airline service would be, particularly on the heavily-trafficked Caracas-Miami route.
Minister Garcia said the big losers from Air Canada's decision would be Canadian tourists trying to enjoy the nation's "natural beauty."
"We regret that they have taken a unilateral decision because Canadians are just going to keep coming to Venezuela," he said.