American Writes Off $592 Million Cash Trapped in Venezuela

[FBaggins]

American Airlines has written off $592 million of cash that could not be repatriated from Venezuela, taking a one-time charge on its financial results for the fourth quarter of 2015. American and other airlines from around the world have struggled to repatriate revenues collected in Bolivars, the Venezuelan currency, for more than three years now. The Venezuelan economy has been in the doldrums and hyperinflation has diminished the value of the Bolivar to almost nothing on the private black market, but the government continues to maintain an official rate that is much higher. Thanks to to this and other economic shenanigans, the Venezuelan government is effectively bankrupt, and there is little hope for American or the other airlines that collectively have more than $3.7 billion in cash trapped in Venezuela.

With the mark-to-market write downs, American will have finally reduced its engagement in and financial exposure to Venezuela to a sustainable level. American has already reduced its service to Venezuela, beginning with an 80% reduction in capacity back in 2014 after dropping from 48 flights per week to 10 flights per week and the elimination of three of its four Venezuelan routes (from Dallas Fort Worth, New York JFK, and San Juan [PR] to Caracas).

In December of 2015, it resumed service to New York JFK with five weekly flights, citing robust demand from New York and Caracas that it could get customers to pay for in dollars. At the moment, American continues to operate flights from New York JFK and Miami to Caracas, as well as from Miami to Maracaibo. Tickets for these flights may be purchased in dollars or other viable foreign currencies, however Bolivars cannot be used to purchase these flights as a hedge against the foreign exchange risk of repatriation.

http://airwaysnews.com/blog/2016/01/13/aa-592m-venezuela-cash/