VENEZUELA: SABRE TRAVEL SERVICES ON AGAIN OFF

C O N F I D E N T I A L SECTION 01 OF 02 CARACAS 000666

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HQ SOUTHCOM ALSO FOR POLAD
TREASURY FOR RJARPE
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E.O. 12958: DECL: 05/27/2019
TAGS: ECON EAIR ETRD CASC PGOV CVIS KHLS VE
SUBJECT: VENEZUELA: SABRE TRAVEL SERVICES ON AGAIN OFF
AGAIN ON AGAIN?

REF: A. CARACAS 614

B. CARACAS 625

C. CARACAS 615

Classified By: A/Economic Counselor Richard T. Yoneoka, for reasons
1.4 (b) and (d).


1. (C) SUMMARY: After Sabre Travel Services suspended
ticketing and reservation services to Venezuelan airlines
Aserca and Santa Barbara (SBA) on May 26 it reactivated the
same on May 28. Both airlines worked in an "emergency"
situation, but managed to maintain operations. However,
Sabre may "shut off" both airlines again June 1 if they fail
to make a May 29 payment. The owner of both airlines, Simeon
Garcia, appears to have played a game trying to get Sabre to
accept payments in Bolivares (Bs) and forcing the GBRV to
focus on the challenges created by the domestic airlines'
inability to secure USD at the official exchange rate. In
addition to paying arrears, Garcia announced on May 28 that
he had agreed to sell 45% of the airlines to an undisclosed
"friend of the government." Garcia is also working on a new
charter project that coincides with the charter project
Mustafa Flores, President of Aeropostal, is pursuing. In an
interesting twist, the GBRV might be posturing to take over
the two airlines by denying them access to USD. END SUMMARY.


2. (C) Sabre Travel Network Vice President for Caribbean,
Colombia, Ecuador, Central America, and Venezuela Julia De
Jesus confirmed to A/EconCoun on May 27, that Sabre suspended
its services to domestic Venezuelan airlines Aserca and Santa
Barbara (SBA) effective May 26 (Ref B). After receiving a $3
million payment by wire transfer, Sabre reactivated SBA and
Aserca's services the morning of May 28, although Sabre may
"turn off" its services again on June 1 if SBA/Aserca does
not continue making weekly $500,000 payments to settle the
additional $3 million debt due Sabre. During the two-day
Sabre outage, SBA and Aserca conducted all passenger check-in
operations for domestic and international flights manually,
without "a crisis" erupting. De Jesus shared that when she
arrived at Simon Bolivar airport the morning of May 27, the
lines to check-in in for domestic flights were in chaos, but
the international check-in area was empty. She learned it
took Aserca forty-five minutes on average to check-in each
passenger manually.


3. (C) According to De Jesus, Simeon Garcia (the owner of SBA
and Aserca approached the Venezuelan Civil Aviation Authority
(INAC) May 23 regarding Sabre's threat to suspend services
due to Aserca's non-payment of Sabre charges. INAC (NFI)
allegedly told Garcia "not to worry, you won't get
disconnected. It's in our hands." In order to get the Sabre
services reconnected Garcia transferred $500,000 from a bank
account in the Caribbean of a different Garcia-owned company
as a "loan" to SBA/Aserca on May 28. The source of much of
Garcia's wealth, De Jesus said, is the ground handling
company he owns and manages throughout the Caribbean. Since
Garcia is also the owner of both airlines, De Jesus
understood that it is "all his money, anyway." Garcia told
De Jesus that he did not want the payment "to go through
normal channels," implying he did not want Venezuelan
authorities to learn of it.


4. (C) According to De Jesus, Garcia thinks the situation is
"now out of control" because INAC has contacted the
Venezuelan State Prosecutors Office in an effort to have it
force Sabre to accept payment denominated in Bolivares (Bs)
rather than the contractually agreed USD payments. Garcia
also believes the GBRV might have a strategy of denying
domestic airlines access to USD in an attempt to pressure
them into selling or going out of business. The local travel
agents association offered to help De Jesus resolve the
situation and pushed Sabre to accept payment in Bolivares.
When De Jesus replied that Sabre could potentially accept Bs
payments from the Venezuelan airlines, but first would have
to renegotiate its agreements with the travel agents which
are denominated in USD, the association withdrew its offer of

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assistance. (NOTE: It is likely the Venezuelan travel agents
do not want the GBRV, and Cadivi and the Venezuelan tax
authority, Seniat, specifically, to know that they have a USD
revenue stream).


5. (C) De Jesus speculated that Garcia is being forced to
"take sides" and that he has been playing an interesting game
of "chicken." She believes that Garcia contacted INAC in the
hopes that Sabre would accept payments in Bs and not
discontinue services. On the opposite side, he could have
engineered this situation to force GBRV officials in INAC and
CADIVI to change the regulations that prevent domestic
airlines from accessing USD at the official rate. (NOTE:
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 regime, see Ref A.)


6. (C) In a further wrinkle to Garcia's strategy, SBA and
Aserca had been up for sale, valued at $500 million. The
owner of a well-known Caracas hotel has offered $30 million
and another party reportedly offered $15 million. According
to De Jesus, as of May 28, Garcia verbally agreed to sell 45%
of his shares in Aserca and SBA airlines to a "friend of the
government." The GBRV's unwillingness to extend CADIVI
authorizations to domestic airlines might be part of a
strategy for the GBRV to devalue the companies slowly and
then seize them after they are heavily indebted.


7. (C) De Jesus added that Garcia characterized the sale of
part of the airlines as an "acceleration of his plan to get
out of the country." He is apparently concerned that he will
be arrested and his airline seized as he has not adequately
proven his loyalty to the Chavez administration. He also
told her that he was working on a new charter airline project
to establish a charter route from Miami to Santo Domingo,
Miami to Lima, and finally, Miami to Caracas. (NOTE: This new
charter flights is strikingly similar to the new proposed
charter flights Mustafa Flores, President of Aeropostal, is
working on for a Makled-owned company based out of Miami.
Several Makled family members have been in jail in Venezuela
since November on drug trafficking charges (Ref C). END
NOTE.)


8. (C) De Jesus told Econoffs on May 29 that Makled-owned
Aeropostal is currently led by Colonel Douglas Vazquez
Orellana, who is also the president of both Simon Bolivar and
Porlamar airports. Also on the government-appointed
"temporary administration board", she said, is the President
of Venezuelan civil aviation authority, INAC, and
government-owned airline Conviasa staff. Sabre turned
Aeropostal "back on" two months ago as Aeropostal has been
making regular $200,000 installment payments on its $16
million debt to Sabre.


9. (C) Comment: SBA/Aserca are not out of the woods and need
to continue regular payments to Sabre, which will be
challenging given the problems securing USD through Cadivi.
INAC's involvement in SBA and Aserca's situation now concerns
Garcia and provides an opening for the GBRV to take
unexpected action against either the airlines or the local
Sabre office. The GRBV would not accomplish much by seizing
Sabre's local assets; composed of a leased office and nine
local staff. All of its information technology systems are
located in another country). It is unclear what Garcia's
motives were or whether he accomplished his goal. The
coincidence between Garcia's new charter flight project and
Mustafa Flores is a concern and warrants further
investigation.
CAULFIELD