Italy's Alitalia scraps Venezuela flights over currency dispute: sources

CARACAS Wed May 14, 2014 8:11pm EDT

CARACAS May 14 (Reuters) - Italian airline Alitalia has canceled service to Venezuela as of June 2 due to delays in repatriating revenue under the country's 11-year-old currency control system, two sources told Reuters on Wednesday.

Venezuela owes airlines some $4 billion, according to the International Air Transport Association (IATA), because the airlines are required to sell tickets in the local bolivar currency but the government has not granted them approval to repatriate that revenue.

"The last flight arrives on June 1, the plane will go back (to Italy) and will not return," said a local company employee, who asked not to be identified, adding that customers would be reimbursed for canceled flights.

An airline industry source separately said the company suspended service due to the dispute.

Neither source specified the amount Alitalia is owed.

The airline had been running five flights per week between Caracas and Rome until May, when it reduced service to only two, according to local media.

Alitalia as well as Venezuela's Water and Air Transport Ministry did not immediately respond to requests for comment.

The Venezuelan Airlines Association said in late March that the government had promised to allow foreign airlines to repatriate ticket sales revenue that had been stuck in the country for over two years. Several weeks later, the IATA complained that the government was not doing enough to resolve the issue.

President Nicolas Maduro has promised that Venezuela will make good on its promise, but he has also threatened to kick out airlines that suspend service.

Air Canada halted its operations in March, citing security concerns related to street protests, and Venezuela immediately cut ties to the airline.

Major airlines flying to Venezuela include American Airlines , Lufthansa, Delta, Avianca and Copa. (Reporting by Christian Veron and Deisy Buitrago, writing by Brian Ellsworth; Editing by Andrew Cawthorne and Ken Wills)

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