Global airlines flying to both the neighbouring countries — Pakistan and Bangladesh — are facing serious problems. They are unable to repatriate revenue of nearly $720 million ($399 million in Pakistan and $323 million in Bangladesh) as the governments have not released it, says the International Air Transport Association (IATA), which represents some 320 airlines comprising 83 per cent of global air traffic.
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Typically, international airlines earn revenues from selling tickets in local currency and convert them into US dollars to facilitate the transfer of profits to their home countries.
Impact on India
The issue of Pakistan may not have a direct impact on India. However, in the last couple of months, garment exports in Bangladesh have been facing huge space constraints in aircraft. A huge volume of garments is now routed via Delhi to Europe and the US. If global airlines decide to reduce flying to Dhaka due to the repatriation of revenue, there could be an indirect impact on India, said a leading freight forwarder.
In Pakistan, foreign airlines face an onerous process when applying for currency repatriation. They need to provide an auditor’s certificate with each remittance, showing the amount to be remitted. This can happen as frequently as twice a month, which is time-consuming. It also adds to the operating costs in Pakistan. At the same time, airlines need to obtain a tax exemption certificate from the Commissioner of Income Tax. This further prolongs the fund repatriation process.
Dollar crunch
In Bangladesh, the delays are due to a shortage of US dollars. “That is why we are asking the government to prioritise the aviation sector when allocating US dollar funds within the Bangladesh economy,” said an IATA spokesperson.
The impact is that foreign airlines operating in Pakistan and Bangladesh are having difficulty and face a delay in repatriating their revenues generated in the two markets back to their home countries, the spokesperson said without naming the airlines affected.
IATA has called on both Pakistan and Bangladesh to immediately release airline revenues that are being held in contravention of international agreements.
“The timely repatriation of revenues to their home countries is critical for payment of dollar-denominated expenses such as lease agreements, spare parts, overflight fees, and fuel. Delaying repatriation contravenes international obligations written into bilateral agreements and increases exchange rate risks for airlines. Pakistan and Bangladesh must release the more than $720 million that they are blocking with immediate effect so that airlines can continue to efficiently provide the air connectivity on which both these economies rely,” said Philip Goh, IATA’s Regional Vice President for Asia-Pacific.
Prior to Covid-19, Pakistan’s aviation sector supported around 4,25,000 jobs and $2.8 billion in economic activity. Passenger traffic recovered to pre-Covid levels in 2023 and are expected to grow by more than 2.5 times by 2040.
Prior to Covid-19, Bangladesh’s aviation sector supported around 125,000 jobs and $728 million in economic activity. Passenger traffic recovered to pre-Covid levels in 2023 and are expected to grow by more than twice by 2040, said IATA