FRANKFURT, Germany, Monday May 30, 2016 – Against the backdrop of a deepening economic crisis in Venezuela, German airline Deutsche Lufthansa AG will suspend flights to the South American country next month “until further notice.”
Euro News quoted the airline as saying that currency controls in Venezuela have made it impossible for the airline to convert earnings into dollars and repatriate revenue. Lufthansa spokesman Andreas Bartels also pointed to a sharp drop-off in ticket demand, especially among business travellers, with the nation mired in its third year of a deep recession.
The German airline joins American Airlines Group Inc., which announced in March that it was cancelling its Caracas-to-New York route just three months after reinstating it, according to a Reuters report. It cited low demand as the reason for the decision. According to Bloomberg, international carriers have struggled for years to transfer back profits from Venezuela, leaving billions of dollars trapped in bolivars (the local currency).
Two years ago, Lufthansa temporarily suspended ticket sales to Caracas, while flights for those already holding tickets operated normally. Bartels said the company hopes to restart the routes pending improved conditions in the country but is sceptical flights will return soon. The low price of oil has badly affected Venezuela’s economy, which is currently suffering the world’s highest inflation and a chronic shortage of even the most basic goods and foodstuffs.
Last week, Coca Cola was forced to halt to some of its operations in the country due to a lack of sugar, joining other manufacturers who have ground to a halt as a result of the lack of raw materials. The deepening economic crisis has led Venezuela’s opposition to push for a petition to recall President Nicolas Maduro. So far Madura has refused to budge, despite efforts from several former leaders, including Spain’s ex-Prime Minister Jose Luis Rodriguez Zapatero, to mediate the political stand-off.
Venezuela has sold at least US$1.7 billion in gold reserves to pay debts this year, decreasing the South American country’s gold reserves to the lowest level on record.
The International Monetary Fund (IMF) predicts the Venezuelan economy will shrink eight percent in 2016 and will contract an additional 4.5 percent in 2017.