WorldCity Business Magazine

Venezuelan roadblock

by Luis Zalamea

A t the beginning of this year, Venezuela ’s relatively solid and sophisticated airline sector suddenly fell hostage to a powerful combination of foes: time, nature and bureaucracy.

The first time I visited Caracas, back in the 1940s, it took almost three hours to drive from the international airport in the town of Maiquetia over the mountains and into the valley where the capital city nestles. It was a scenic and exciting journey along a two-lane road that narrowed to one lane at some dizzying precipices perhaps better managed on mule back.

When I went back in 1951, one of those enterprising military dictators who love huge public works had completed a six-lane stateof- the-art expressway connecting Caracas to the coastal area where both Maiquetia and the nation’s then-biggest seaport, LaGuaira, were located. Linked by a series of tunnels, viaducts and curves that sliced through the mountains, the highway carried a $231 million price tag (at 1950 prices) financed by Venezuela ’s oil exports. It was hailed at the time as one of Latin America’s engineering wonders of the 20th century.

For more than 50 years, the modern thoroughfare handled mammoth volumes of people and goods, keeping the country’s economy going. In 2005 alone, it collected $1.07 billion in tolls.

But nature and bureaucracy caught up with the expressway. Engineering inspectors on Jan. 5 confirmed that terrain around the roadway had shifted and the steel-and-concrete Viaduct 1 was about to collapse. The highway was immediately closed and, in around-the-clock meetings, government representatives and the Venezuelan Airlines Association, ALAV, hashed out a contingency plan.

Protecting airline passengers

At the outset, government agencies and domestic airlines scrambled to adjust their schedules and find innovative solutions. The government organized shuttle-bus service on the old two-lane highway, but traffic volume has been limited because it, too, is poorly maintained. Use of the old highway means driving time from at least an hour and a half to as much as three hours. That compares with the 40-minute ride when traffic wasn’t too heavy on the modern expressway. In tandem, taxi fares have increased as much as 100 percent.

In the first days after the expressway closed, domestic airlines canceled from 30 percent to 40 percent of flights in and out of Maiquetia. At the same time, they put into place emergency air shuttles between the international airport and a small private airport in downtown Caracas. Here, too, there was a problem: The smaller airfield could only handle turbo-props.

State-owned airlines Conviasa and Aerotuy agreed to fly about 600 passengers daily on the air shuttle. Smaller carriers like Avior, Lai and Laser soon followed suit. Then carriers Aeropostal and Aserca set up passenger air shuttles between the Simn Bolvar International Airport in Maiquetia and the airport in industrial city Valencia in central Venezuela. From Valencia, passengers have a two-hour trip by car to Caracas.

Using this combination of air and land routes, Aeropostal reportedly got 4,000 passengers to their correct destinations in the first month of the expressway crisis. As the strategy moved forward, steps were taken to reopen old La Carlota military airport in downtown Caracas.

Nearly a month after the viaduct was opinion condemned, clearer strategies emerged from the stop-gap measures. At the same time, the government examined long-term solutions. President Hugo Chvez announced it would take 15 months and $140 million to construct an alternate viaduct. The Venezuelan-American Chamber of Commerce and Industry, known as VenamCham, predicted in early February that the road crisis would help push Venezuela’s inflation rate to 16 percent in 2006. That’s above the 11 to 12 percent projected by the government.

The federal government had granted a relief subsidy of $1.5 billion to business and workers most hurt by the crisis in the state of Vargas, where both the airport and the seaport are located. It also subsidized the local airline sector with a 20 percent cut in fuel prices.

Airline association ALAV suggests free landing rights and air navigation services for flights that must be changed due to the damaged expressway, as well as a moratorium on debts owed by airlines to government agencies.

But Humberto Figuera, vice president of ALAV, claims even this is not enough. He points to the related effect the road closure has had on the work force at airports, hotels, land transportation carriers and in retail trade.

Hampering the economy

The crisis is already jeopardizing individual airlines. Aeropostal has cut operations between Maiquetia and the rest of the country by 43 percent. In February, airlines also asked the government to help them offset lagging passenger demand, at the same time they proposed beefing up land shuttles between Caracas and Maiquetia to accommodate heavy vacation traffic for carnaval week at the end of February.

“Overall, the expressway crisis has probably changed forever the way the market is managed,” says Figuera. “Some routes are being operated with new stopovers acceptable to passengers. On weekends the average load factor for January was maintained while on weekdays the market has behaved erratically by often resorting to the land option.”

Venezuela ’s expressway crisis has revealed unexpected and refreshing resiliency by the airline industry and the government. When faced with a potentially disastrous situation, they joined forces to react immediately. That knowledgeable aviation industry leaders should now favor keeping some of these stop-gap measures in place permanently speaks well for their effectiveness. As to long-term solutions that call for major decisions and big bucks from the public and private sector, we’ll just have to bide our time.