Cash-strapped Pakistan struggling to pay $290 mn to international airlines

The global air transport body has warned of an 'aviation crisis' in Pakistan as airlines are struggling to recover USD 290 million due to a severe financial crisis, Dawn reported quoting the Financial Times on Thursday.

Pakistan Civil Aviation Authority (PCAA) has said it was trying to pay the airlines on time and has been in contact with relevant authorities over the issue.

The Financial Times, while quoting the International Air Transport Association (IATA) said it has become "very challenging" for carriers to serve Pakistan as they struggle to repatriate their dues which are paid in dollars, Dawn reported.

The IATA, which represents some 300 airlines comprising 83 per cent of global air traffic, said USD 290 million were stuck in Pakistan as of January, which increased by almost a third since December.

"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."

Outstanding dues reached USD 290 Million, Dawn wrote citing a Financial Times report.

"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," Goh added.

While talking to Dawn, PCAA DG Khaqan Murtaza confirmed airlines were facing some delays in the repatriation of their payments but added that the authority was in contact with the State Bank and the finance minister for timely payments to the airlines.

In December 2022, the global aviation body said Pakistan has blocked USD 225m it owed to international airlines, making it one of the top markets where airline funds have been blocked from repatriation, according to Dawn.

The development coincided with Pakistan's balance of payment crisis with fast-depleting foreign exchange reserves, standing at a low mark of USD 4.3 billion.

The ongoing crisis has also hit the aviation industry where airlines sell tickets in local currency but repatriate dollars to pay for expenses such as fuel costs.

The 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.

Last month, Virgin Atlantic announced the suspension of its operations in Pakistan.

Although the airline said that the decision was part of its plan to revamp operations, the FT, citing a person familiar with the matter, said the decision was based on the economics of the route.

Earlier this month, the Senate Standing Committee on Aviation recommended the aviation ministry meet with the airline heads and 'dispel the negative opinion about Pakistan' and convince them to resume operations as usual.