VENEZUELAN AIRLINES MAY LOSE SABRE TRAVEL SERVICES

C O N F I D E N T I A L SECTION 01 OF 02 CARACAS 000625 SIPDIS HQ SOUTHCOM ALSO FOR POLAD COMMERCE FOR 4332/MAC/WH/JLAO TREASURY FOR RJARPE NSC FOR RKING E.O. 12958: DECL: 04/21/2019 TAGS: ECON PGOV PREL ETRD EINV EAIR CASC CVIS KHLS PTER, SNAR, VE SUBJECT: VENEZUELAN AIRLINES MAY LOSE SABRE TRAVEL SERVICES REF: A. CARACAS 614 ¶B. CARACAS 615 Classified By: A/Economic Counselor Richard T. Yoneoka for reasons 1.4 (b) and (d). ¶1. (C) SUMMARY: U.S. travel services giant Sabre has sent "disconnect letters" to two privately owned Venezuelan carriers and has already suspended its contract with government owned carrier Conviasa due to non-payment. Sabre is concerned that if it discontinues its services in Venezuela, the Government of the Bolivarian Republic of Venezuela (GBRV) will accuse it of hampering Venezuelan airline operations. Conviasa, acting on behalf of the Venezuelan government, has approached Sabre about providing service to a Venezuelan/Argentine/Bolivian airline that President Chavez hopes to create. END SUMMARY. ¶2. (C) Sabre staff told Emboffs in a May 18 conference call that Sabre sent disconnect notices with a deadline of May 22 to Santa Barbara Airlines (SBA) and Aserca. (Both privately owned airlines are now under the same Venezuelan holding company.) If the airlines do not pay Sabre over $3 million in past due fees and an additional monthly service charge of $250,000 by that date, they will be "shut off". Various Sabre participants on the call explained that as with all Venezuelan commercial carriers, excluding government-owned Conviasa, SBA and Aserca rely on Sabre to distribute their fares to travel agencies. (Note: Venezuelan airlines must pay Sabre in dollars, which are currently in short supply in Venezuela in part due to the currency control regime. End Note.) ¶3. (C) Sabre staff added that Sabre is one of only a handful of companies world wide able to provide commercial airline fare distribution services. Sabre's Venezuela Representative, Jetzabel Fernandez emphasized that 65 percent of Venezuelan travel agencies use Sabre services and all Venezuelan commercial airlines use Sabre's fare distribution service. If Sabre's European competitor AMADEOUS picked up all Venezuelan carriers' contracts, the transition to the Spanish system "would take months", she said. Additionally, a Sabre VP added, SBA and Aserca operations are also "hosted" by Sabre, meaning Sabre manages the airlines' crew scheduling, inventory, etc. Losing Sabre's services would have a serious impact on airline operations. Sabre also reported concern that if it discontinues some, or all of its contracts in Venezuela for non-payment, the GBRV will accuse it of hampering Venezuelan airline operations and travel services. ¶4. (C) Fernandez added that government-owned airline Conviasa had recently approached Sabre regarding providing service to the new Latin American carrier President Chavez has said he would like to create. According to the Conviasa representative, Fernandez said, the idea would be to create some type of airline or alliance with Bolivia's Lloyd, Argentina's Aerolineas Argentinas and Venezuela's Conviasa. Fernandez reported Sabre HQ was curious about the GBRV proposal, but needed more details. (Note: Chavez has discussed various scenarios for a regional airline or airline alliance since 2007 and has given the hypothetical carrier various names: "Alas del Sur" (Wings of the South) or "ALBA Sur" appear most frequently. End Note.) ¶5. (C) Venezuelan carrier Aeropostal President Mustafa Flores told Econoff May 13 that government-owned airline Conviasa is practically bankrupt, although the government is keeping it on life support, and privately owned Avior is hardly operating. Additional domestic carriers, SBA and Aserca, will likely cease operations soon due to large debts to both the Venezuelan and U.S. governments, he asserted. (Note: SBA and Aserca met with Econoff May 6, to discuss the $6 million in back taxes and fees they owe the USG. Domestic airlines are unable to obtain dollars from government currency control agency CADIVI at the official exchange rate of 2.15 to the dollar for international taxes and fees. For an extensive discussion of Venezuela's currency control CARACAS 00000625 002 OF 002 regime, see Ref A.) ¶6. (C) Flores reported, and Sabre confirmed, that Aeropostal has recently signed a new contract with Sabre. The government seized Aeropostal in November 2008 due to the arrest of its owner, Basel, and his brothers Abdala and Alex Makled, on drug charges (Ref B). Mustafa said the GBRV proceeded to terminate Aeropostal's Sabre contracts after the seizure because Sabre is a "Yankee" company. However, in March, Aeropostal paid Sabre nearly half a million dollars in past due debt in order to get the Sabre system "turned back on." According to Sabre staff, while Aeropostal still owes Sabre "millions", the airline has committed to paying nearly $500,000 a month for the foreseeable future for current and past due amounts. -------------- COMMENT -------------- ¶7. (C) Venezuelan airlines' inability to obtain CADIVI dollar authorizations has made it very difficult for them to pay Sabre contract costs. Sabre claims it is prepared to cut its losses and suspend its contracts. Its departure would negatively affect Venezuelan airline operations in the short and medium term. The GBRV would likely blame the U.S. if Sabre decides to pull the plug on Venezuela. GENNATIEMPO