Dollar crisis threatens to ground airline operations from Lanka -Sunday Times
Sri Lanka’s dollar crisis is now threatening tourism revival. Industry sources warn that foreign carriers have not increased flights and may even cut frequencies because general sales agents (GSAs) and local airline offices have for months fallen back on their dues–payable in dollars–to principals abroad.
The problem had been brewing for “four-to-five months”, these sources said, adding that multiple meetings were held with the authorities, but to no avail. The payments include percentages of ticket sales or incomes from cargo space that, in the past, were “instantly” remitted to the principals in foreign currency. The travel industry’s warning comes amidst a customer communication from Maersk, the logistics company, this week that “due to current USD unavailability in the market,
we are facing challenges in making the freight collection remittance on time to our principal”.
“You will appreciate that this will undoubtedly create severe adverse impact on future space availability to local exporters,” it states. “Hence, after careful consideration and in keeping with the law, we are compelled to change the freight collection payments to USD with immediate effect.” This means the global heavyweight must now be paid for freight in US dollars.
Travel sector sources confirmed that dollar woes were a concern among all airline carriers. “We have to remit payments for cargo in dollars,” one pointed out. “When we sell tickets, apart from our commission, the rest must be remitted in dollars. But we have to wait in the forex queue. With this uncertainty, airlines are not increasing flights.”
This poses serious challenges to the tourism industry despite the Government having invested heavily in promotion. Some airlines that had 12 flights a week are now down to three. “If we go on like this, I fear some airlines might pull out,” a GSA source said. “We can’t pay on time and we can’t delay payments either. The Government must give us priority because we bring in revenue, we bring in tourists, we do the advertising and we sell Sri Lanka as a destination.”
Also affected are bank settlement payments (BSPs). “After airlines doing business in Sri Lanka meet local disbursements such as rentals, salaries, offices at the airport, various taxes and Customs fees, fuel, catering and so no, there is residual revenue that regularly needs to be sent back in dollars to their principals,” explained another source. “There was never an issue all these years. However, for the past four months, the BSPs cannot be remitted to the respective countries through the corresponding banks due to the shortage of dollars in Sri Lanka. This has raised huge concerns in the airline industry as head offices are wondering how long this will take to be resolved.”
The whole industry is “suffering”, he said, and making piecemeal payments as allowed by the banks. “Many airlines are reluctant to restart in Sri Lanka while some are double-guessing whether or not to fly here. These include many Far-Eastern carriers. Compounding the problem is the situation with COVID-19. Airlines are not confident that their earnings are safe.”
“We have alerted the Government till the cows come home,” he sighed. “It’s just been passed from pillar to post with no response.” Not only will this hurt the inflow of tourists, Sri Lanka will be seen as bankrupt.
All BSPs through the International Air Transport Association are made via the Deutsche Bank. (Sunday Times)