KLM temporarily suspends flights to Cairo amid foreign currency crisis

Wednesday 14-09-2016 06:56 PM

KLM logo - Photo from Facebook page

CAIRO, Sept. 14 (Aswat Masriya) - KLM Royal Dutch Airlines decided to temporarily suspend flights to Cairo starting next January amid a lingering foreign currency crisis in Egypt, the company said in a statement on Wednesday.

Egypt is currently facing an acute foreign currency shortage due to pressures on its foreign reserves after years of political turmoil. This has affected the ability of many companies to repatriate earnings and transfer money abroad.

KLM announced that the final flight to Cairo will depart from Amsterdam on Jan. 6, 2017, and the final flight returning to Amsterdam will be on Jan. 7, 2017.

"After suspension of the KLM service to Cairo, Air France -KLM will maintain its presence in the Egyptian capital, with Air France operating six weekly flights out of Paris," KLM added in its statement.

Air France and KLM Royal Dutch Airlines operate separate airlines as part of a joint airline group.

The government and the central bank have been adopting various measures to curb black market trading and ration dollar spending. However, pressures resulting from foreign currency shortage has been mounting, leading to persistent demands of another devaluation of the pound.

The Central Bank of Egypt devalued the pound by about 14 per cent to reach EGP 8.78 against the dollar in March in an effort to close the gap between the official and parallel rates but the move failed to boost dollar liquidity or close the gap. 

The pound currently changes hands at around EGP 12.5 per dollar in the black market, while banks have kept the pound steady at EGP 8.88. 

"The devaluation of the Egyptian pound and the decision of the Central Bank of Egypt to impose restrictions on the transfer of foreign currency out of Egypt have a negative impact on results of KLM," the statement read.

Egypt's foreign reserves stood at $16.564 billion at the end of August, less than half the amount held in 2011 before the January uprising drove away tourists, and foreign investors, major sources of foreign currency.

The country has reached staff-level agreement with the International Monetary Fun (IMF) in August for a $12 billion three-year lending programme that could boost its reserves and plug its funding gap, but the deal requires Egypt to secure $6 billion in bilateral financing.

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