The International Air Transport Association (IATA), a trade association of global airlines, has warned that Pakistan has become “very challenging” to serve as carriers struggle to repatriate dollars, while $290 million remains struck in the crisis-hit country since January, reported the Financial Times on Thursday.
The aviation body said $290 million of funds were stuck in Pakistan as of January, up nearly a third since December, said the report.
Last year in December, IATA, which represents some 300 airlines comprising 83% of global air traffic, in a press release said that Pakistan has blocked $225 million of airline funds for repatriation. The country was among the top markets where airline funds have been blocked from repatriation, IATA had said back then.
“Airlines are facing long delays before they are able to repatriate their funds,” Philip Goh, the IATA’s Asia-Pacific head, was quoted as saying by FT. “Some airlines still have funds stuck in Pakistan from sales in 2022.”
The development comes as Pakistan faces a balance of payment crisis with depleting foreign exchange reserves, with funds held by the central bank standing at a low level of $4.3 billion.
Meanwhile, the import cover is around one month with February’s bill clocking in at $4 billion, according to data available with the Pakistan Bureau of Statistics.
The South Asian country worries are also compounded by an incessant delay in reviving its bailout programme with the International Monetary Fund (IMF), a facility that has been stalled since November last year.
The ongoing crisis has hit industries across the board and air carriers, which sell tickets in local currency but need to repatriate dollars to pay for expenses such as fuel, are no exception.
Last month, Virgin Atlantic announced that “it will be suspending services between London Heathrow and Lahore and Islamabad.”
However, the FT report, citing a person familiar with the matter, said the airline’s decision was based on the economics of the route.
Goh said: “If conditions persist that make the economics of operation to a country unsustainable, one would expect airlines to put their valued aircraft assets to better use elsewhere.”
Earlier this month, the Senate Standing Committee on Aviation decided to send a recommendation in writing to the aviation ministry to call a collective meeting with all airline heads in order to dispel the negative opinion built about Pakistan and convince them to resume operations as usual.
However, FT, citing data from an aviation analytics company Cirium, shared that foreign airlines have been reluctant to return to Pakistan, with fewer total flights scheduled for March 2023 than the same month in 2019.
“If you can’t take money out of a country, then there’s no point in you even going there,” said Mark Martin, chief executive of aviation consultancy Martin Consulting, in the FT report.