Int’l airline operations at risk as Pakistan ‘freezing funds’

The global air transport body has urged countries, including Pakistan, to allow airlines to repatriate their profits, warning that “rapidly rising levels of blocked funds posing threat to airline connectivity”.

The International Air Transport Association (Iata) said in a statement on Sunday that the industry’s blocked funds increased by 47% to $2.27 billion in April 2023 from $1.55 billion in the corresponding month of last year.

“Airlines cannot continue to offer services in markets where they are unable to repatriate the revenues arising from their commercial activities in those markets,” the Iata added.

The airline association director general Willie Walsh urged the governments to work with industry to resolve this situation so airlines can continue to provide the connectivity that is vital to driving economic activity and job creation.

The top five countries account for 68.0% of blocked funds: Nigeria ($812.2 million), Bangladesh ($214.1 million), Algeria ($196.3 million), Pakistan ($188.2 million) and Lebanon ($141.2 million).

The airline association also urged governments to abide by international agreements and treaty obligations to enable airlines to repatriate these funds arising from the sale of tickets, cargo space, and other activities.

In March this year, the global airline industry body warned that it had become “very challenging” to continue operations in Pakistan as carriers struggle to repatriate dollars, adding to difficulties for foreign companies operating in the crisis-hit country.

Pakistan is suffering from an escalating financial crisis, with perilously low levels of foreign reserves leading to shortages and rising prices of essential goods.

Companies are contending with delays in importing or converting currency, and analysts have warned that the country is at risk of default.

Air carriers, which sell tickets in local currency but need to repatriate dollars to pay for expenses such as fuel, have been hit particularly hard.

In February this year, Virgin Atlantic announced pulling out of Pakistan, just over two years since it launched services. The carrier had encountered problems repatriating funds, but the decision to suspend flights was based on the economics of the route, according to a person familiar with the decision.