UPDATE 1-Venezuela owes Copa Airlines $500 mln - CEO

Fri May 30, 2014 6:22pm EDT

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By Daniel Bases

NEW YORK May 30 (Reuters) - Copa Airlines said on Friday the Venezuelan government owes it approximately $500 million in unrepatriated revenue, approximately 12 percent of what the local airline association says is owed to airlines because of currency controls.

On Friday Venezuela said it will begin releasing $2.1 billion in hard currency to companies that have struggled to obtain greenbacks as a result of the controls. Airlines are expected to see a $486 million disbursement.

Speaking just before the government's announcement, Pedro Heilbron, the chief executive officer of Copa's parent Company Copa Holdings, said the dispute has resulted in drastic cutback in seat capacity for its Venezuelan operations.

"By July 1st we will have reduced around 40 percent of our seat offering into Venezuela, both from Panama and from Colombia," Heilbron told Reuters before meeting investors in New York.

"That will take us to a point where the risk of accumulating Venezuelan currency, Bolivars, will be minimal," he said.

Venezuela's local airline industry association said on Thursday that 24 international airlines have an estimated $4.2 billion trapped in the country due to currency controls.

The Venezuelan government requires airlines to sell tickets in the local bolivar currency, but has been slow to allow repatriation of funds under strict foreign currency controls.

"We have had informal conversations but we have not had a formal offer," Heilbron said, adding he expected a near-term solution.

The finance minister this week said Venezuela had made pending currency disbursements to six airlines, without detailing the amounts.

Copa, with 92 planes in operation, expects to end the year with 98, the majority of them Boeing 737-800's and 737-700's.

Heilbron said the airline has firm orders for 37 more aircraft and options on another eight, filling out its growth plans through 2019.

The airline has no plans to expand beyond the Americas but will add more frequency to existing routes.

"What we have guided to this year is more or less 10 percent capacity growth," he said, adding "We have also guided to operating margins between 19 and 21 percent for the year."

Shares of Copa hit a seven-week high on Friday of $144.53 a share before losing ground to end down 0.46 percent on the day at $142.93.

(Additional reporting by Girish Gupta in Caracas; Editing by James Dalgleish)