Foreign airlines operating in Egypt are facing difficult times trying to transfer their remittances in hard currency, Sherine Nasr investigates Over the past 12 months, nine leading European carriers operating in Egypt including Lufthansa, British Airways, Air France and Alitalia, have been struggling to have their remittances transferred in hard currency. According to the latest estimates, at least some LE150,000 for all the European carriers are still trapped in Egyptian banks. "This problem is widely underestimated in Egypt. Not only will airlines suffer but the problem may also have serious consequences on the Egyptian economy in general," said Werner Heesen, general manager of Lufthansa. According to Heesen, the problem has two major negative effects on the airlines, "First, we can not meet our obligations, sustain our operations and plan ahead. Second, we have to face the progressive devaluation of our money in Egyptian pounds," he said. Heesen warned that the affected airlines may seriously study the possibility of reducing their service to and from Egypt. "This means that Egypt will have less connection with the most important European markets," he cautioned. It is obvious that the indirect implications of this problem have not been studied carefully by the government. Although charter flights to Egypt are coming regularly, the greatest bulk of passengers still fall into the scheduled flights. It is worth noting that European carriers account for 50 per cent of total carrier activities in Egypt and that 70 per cent of their sales take place abroad. Thus, they play a crucial role in allowing direct inflow of tourists to Egypt. According to Heesen, passengers flying on board the major European carriers have exceptionally high expenditure rates compared to passengers from other regions in the world. This means that a slow in their flow "can constitute a real threat to the Egyptian tourist movement in particular, and the direct foreign investment to Egypt at large", he said. Ironically, the government regulation could thus backfire, worsen the foreign exchange crisis as fewer Westerners visited Egypt. According to bilateral agreements on air transport signed between the government of Egypt and the European partner government, airlines' remittances are to be transferred in hard currency. Although there has always been a problem with hard currency in Egypt, the troubles came out into the open when the government decided to float the Egyptian pound. With the market suffering from an outflow of hard currency, the dispute with the air carriers escalated. "We are caught in a vicious circle. We can not turn to the black market for hard currency. We have to operate via legal channels, namely, the banks which, unfortunately, hold no clear policy with regards to this issue," said Inal Sabri, general manger of British Airways. Complicating matters for the companies, all airport services, navigational fees and fuel in Egyptian airports are charged in dollars. Concerned about the negative impact this could potentially have, the relevant embassies have petitioned Prime Minister Atef Ebeid pleading for his swift intervention. The embassies acknowledged that airlines have been offered by banks -- on an informal basis -- the possibility to repatriate revenues whenever foreign currency is available. However, no clear indications have been given on the official prospects of such operations, with high exchange rate commission costs being charged, thus reducing the revenues of the airlines which were already lessened by the ongoing devaluation of the Egyptian pound. On its part, the Central Bank of Egypt (CBE) has given direct and strongly-worded orders to the investment banks to immediately solve the problem. "A sum of $20 million transfer to the airlines on a monthly basis should not at all constitute a problem to banks," said Mahmoud Abul-Oyoun, governor of the CBE to the daily Al-Akhbar newspaper in answer to the airlines' petitions. However, the problem continues to persist with no resolution. As a result of the ongoing restrictions, some airline companies' headquarters are considering capacity reductions in terms of flights and seats, while at the same time scaling down or even freezing future investment in terms of less and smaller aircrafts. "As a global operator, Lufthansa, for example, can seek other options. It can overfly Egypt or shift its flights to other parts of the region," said Heesen. "The seriousness of this matter on Egypt's image and economic welfare deserves the utmost attention on the part of the government. A satisfactory and viable decision has to be taken immediately to settle this issue satisfactorily," said Heesen.
