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Lower oil prices disrupting some air routes

 

The big drop over the past year in oil prices has been a boon to bargain-seeking air travelers, but has devastated economies that depend heavily on oil revenue. And that, in turn, has led to cancellation of flights to a number of countries.

The latest is LATAM's dropping of flights to and from Venezuela, which is one of the countries hardest-hit by the downward spiral of oil prices. In order to keep its supply of "hard" currencies, such as U.S. dollars and Euros, it's limited their export, meaning that airlines can't take their earnings home.

LATAM, formed by the merger of LAN Chile and TAM of Brazil, is South America's largest airline. Its expenses for staff, facilities and fees in Venezuela are much lower than its income there; in essence, its earnings are trapped. That situation previously led American Airlines and others to drop the country from their networks. American wrote off nearly half a billion in profits on its books.

Similarly, United has just ended its last service to Nigeria, another country hurt by low oil prices and limiting export of hard currency. Egypt is also on the airlines' warning list, and others could follow.

For more details on the LATAM move from USA Today, click HERE

The best part of every trip is realizing that it has upset your expectations

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Very interesting.  It's hard to tell from the article whether the governments making the currency decisions would benefit from rethinking the policy of restricting flow of hard currency or if the loss of revenues from cancelled flights has little impact overall and the economies are too far gone for them to worry about this segment.

I suspect the "ruling class" of these countries will do fine, and that those who suffer are the average citizen.  It was difficult to buy consumer goods in Venezula before the collapse in oil prices, so it must be impossible to find a sheet of toilet paper in that country now.

Twitter: @DrFumblefinger

"We do not take a trip, a trip takes us".  John Steinbeck, from Travels with Charlie

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