Currency crisis: airlines stop Iran flights

October 09, 2012

RECORDER REPORT

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Foreign airlines, including Malaysia's AirAsia and Britain's BMI, are ceasing services to Iran amid its mounting economic problems spurred on by Western sanctions. AirAsia announced it was suspending its four flights a week between Kuala Lumpur and Tehran from next Sunday because of challenging business conditions, notably the "volatility of the Iranian currency." BMI will halt its flights from Saturday because of its full take-over by British Airways, a spokeswoman for the parent airline told AFP in London, adding that "customers will be offered a full refund."

Travel agents in Tehran said Georgian Airways was also considering halting its four weekly flights, but there was no confirmation from the airline itself. Some major Western airlines were continuing to fly to Tehran, though, namely Lufthansa, Austrian Airlines, KLM and Alitalia.

Austrian said in a statement that "we plan to continue our flights VIE-THR-VIE up to five times a week," and dismissed rumours that they would stop. Iran's economy is being roiled by Western sanctions that have exacerbated underlying problems such as high inflation and unemployment. Last week, the Iranian rial collapsed, losing 40 percent of its value from the previous week.

The government has tried to impose a fixed rate for dollars in the previously freely traded open market, but money traders in central Tehran said they were refusing to apply that rate. Iran's government has capped their rate at 28,500 rials to the dollar. Black market dealers were surreptitiously offering dollars at the rate of 32,000 rials.