ISLAMABAD: A global airline industry body has warned that Pakistan has become “very challenging” to serve with flights as carriers struggle to repatriate dollars, with $290 million in funds stuck in the South Asian nation as of January, the Financial Times reported.
Pakistan is facing a balance of payments crisis, with its central bank foreign exchange reserves dropping to levels barely able to cover four weeks of imports. Companies are contending with delays in importing or converting currency, and analysts have warned 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.
The International Air Transport Association said $290 million in funds were stuck in Pakistan as of January, the most recent data available, up nearly a third since December. Pakistan currently holds the second-largest amount of foreign currency from airlines globally, after Nigeria.
“Airlines are facing long delays before they are able to repatriate their funds,” Philip Goh, the IATA’s Asia-Pacific head, told the Financial Times. “Some airlines still have funds stuck in Pakistan from sales in 2022.”
Virgin Atlantic announced last month it was 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.
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.”
Airlines are also struggling to repatriate funds from Sri Lanka and Bangladesh.
A Pakistan senate committee this month asked the aviation ministry to urge airlines to resume operations, according to local media.
But foreign airlines have been slow to return to Pakistan, with fewer total flights scheduled for March 2023 than the same month in 2019, before the pandemic, according to aviation analytics company Cirium. Emirates flights were down 24 percent, while those of Saudi state carrier Saudia declined 17 percent.
