American Airlines writes off over US$½billion trapped in Venezuela

American Airlines has written off over US$½billion trapped in Venezuela as a result of insurmountable currency controls. They have confirmed that the airline will include a USD$592 million special charge for the last quarter 2015 “due to continued lack of repatriations and deterioration of economic conditions in Venezuela.”
Concerns over the amount of money trapped in the country reached a peak at the beginning of 2014 after it became apparent that money raised through airline ticket sales in that country was not going to be repatriated any time soon. The problem lay in the situation where airlines could only sell tickets in Venezuela in the local currency, bolivars, and not dollars, a system which had been in place for just over 10 years. However, the government stalled on converting this money into dollars to the point where at the beginning of 2014 airlines were owed a combined total of US$3.8billion.
In March 2014 the government agreed to repatriate the full US$3.8bn with conversion rates based at the time of ticket sales, but by July that year, only US$424million had been returned, while the overall debt had increased to US$4.1billion. Despite continual and continued pressure from the International Air Transport Association (IATA), little progress on the matter was made in 2015 and in June they confirmed that US$3.7billion was still trapped.
American also confirmed that it continues to expect a pre-tax margin of 12% -14% for the fourth quarter, excluding special items, and still expects that passenger unit revenue fell by between 5% and 7% percent compared to the same quarter in 2014. The airline also indicated that it moved USD$2.9 billion of tax allowances – resulting from several years of losses before its 2013 merger with US Airways – to its income statement as it anticipates being profitable “on a sustained basis.”