American Airlines Stops Accepting Argentine Pesos Amid Currency Conversion Issues

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American Airlines has stopped accepting Argentine Pesos due to issues with converting the currency into US Dollars.

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Customers in Argentina now have to use foreign currency or foreign issued credit cards to purchase tickets from AA.

Argentina’s economy is in turmoil for quite some time already and the currency situation became pretty bad as well due to a severe shortage of foreign currency reserves. Companies who rely on having local currency converted to foreign ones and sending them to their bank accounts abroad are faced with a difficult situation how to continue operations.

AP reported today (access here) that at least American Airlines has taken precautionary measures to avoid a second Venezuela situation where also Billions of USD equivalent are currently trapped without any way to convert them from local Bolivar to foreign currencies.

FORT WORTH, Texas (AP) — American Airlines says it has stopped taking Argentine pesos as payment for tickets because of limits on its ability to convert the money into dollars.

Airline spokeswoman Martha Thomas said Wednesday that American would try to resolve the issue with the new government of President-elect Mauricio Macri.

American is continuing to operate 27 flights per week between the U.S. and Buenos Aires, more than any other airline, Thomas said. However, customers in Argentina must use foreign credit cards or dollars or other foreign currencies to buy tickets from American.

 Under outgoing President Cristina Fernandez, Argentina responded to a shortage of foreign-currency reserves by sharply limiting the amount of dollars that companies could transfer out of the country.

On Sunday, Macri defeated Fernandez’s favored candidate and will take office on Dec. 10. He campaigned on promises to revive Argentina’s weak economy with free-market policies including the removal of currency controls.

The Argentina dispute is similar to one between Venezuela and foreign airlines. An airline-industry trade group said in June that foreign carriers had $3.7 billion in ticket revenue trapped in Venezuela because of currency controls. Fort Worth-based American, the world’s largest airline, eliminated many flights to Venezuela last year because of the standoff.

I would expect other foreign airlines to follow into the footsteps of American and begin to also require foreign currency to be paid for their tickets.

The issue for both passengers and the airlines is quite obvious. On the passenger side, most will have little (if any) personal foreign reserves. The airlines can not continue to accept a currency which is pretty much paper money and doesn’t allow them to pay for any of their liabilities outside Argentina.

Conclusion

If you plan on traveling to Argentina remember to take a sufficient amount of foreign currency with you to properly get through your holiday or business trip. Do not exchange too much of it at once. John recently visited South America and has written about the cash exchange process in detail (see here).

If you or your friends and relatives plan on buying airline tickets from Argentina then you should follow the situation closely in the next few months to see what measures the new government will impose to rectify these issues.

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