KLM suspends Cairo flights for 'economic reasons'

KLM Royal Dutch Airlines has announced it would temporarily suspend flights to and from Cairo starting 8 January 2017 due to economic reasons.

"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 airliner explained in a statement on Wednesday.

According to the statement, KLM's final flight to Cairo will depart from Amsterdam on 6 January 2017, with the final flight returning to Amsterdam on 7 January 2017.

The company made it clear that its subsidiary Air France would continue its operations in Cairo, operating six weekly flights out of Paris.

It also added that passengers with reservations to travel from Amsterdam to Cairo after 8 January 2017 would be rebooked on the most suitable alternative.

Despite posting the announcement on its website, KLM is yet to formally communicate its decision to Egypt's civil aviation ministry.

In response, a ministry official told reporters on Wednesday that the central bank had put in place a mechanism by which the concerns of the airlines could be addressed and their earnings repatriated.

In March, the ministry reached an agreement with the central bank over paying foreign airlines who had complained of being unable to repatriate earnings.

KLM had told Reuters in February it had not been able to repatriate any earnings for months.

British Airways has said it faced similar problems, though it has not suspended flights to Cairo.

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. - KLM

Egypt is facing an acute dollar shortage that has stifled the ability of some companies to repatriate earnings and transfer money abroad, with many waiting in lengthy queues for allocations from the country's central bank and others resorting to an expensive black market for dollars that cuts into profits.

The country's net foreign reserves stood at $16.564 billion at the end of August, less than half the roughly $36 billion held in 2011 before an uprising drove away tourists and foreign investors, major sources of foreign currency.

The bank, which devalued the Egyptian Pound by about 14 percent in March, has sought to preserve forex reserves for essential items such as food, fuel, medicines and manufacturing components.

In August, Egypt reached a preliminary agreement with the International Monetary Fund 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.