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Currency Deterioration Drives Carriers Out Of Sudan

Airlines may halt operations in Sudan

Feb 03, 2011

Bentiu — A Kenyan private airline has decided to suspend operations in all ten states of Southern Sudan in light of the chronic deterioration in the value of the Sudanese pound against the U.S. dollar, one of its officials told Sudan Tribune.

"We are closing down because we were facing a lot of challenges in the market due to high dollar rates. This is why we stopped and this decision came from the board of directors," said Malual Tuong who is Branch manager for 748 Air Services in Sudan's Unity state.

Tuong emphasized that the airline was forced to make this move as a result of the direct impact of the exchange rate issue on its bottom line. He disclosed that the company's senior management team was recently in Juba to assess the situation.

The airline's branch manager gave an example of how a ticket worth 500 Sudanese pounds used to exchange for 200 dollars but because of the declining exchange rate it is now worth less.

The decision became effective Monday and no date has been given for it to resume operations. Tuong said they could reverse the move if currency situation improves.

"If we are able to get any ministry or the bank of South Sudan to give us dollars, then we would be able to come back to the market. Otherwise for the moment we don't know how long we will be out of the market" he said.

The situation faced by 748 airlines is not the only one of its kind in Sudan.

The Sudan manager of German airline Lufthansa, Hartmut Volz, told Reuters last Thursday the airline industry was being hit hard, with millions of dollars in revenue stuck inside Sudan.

"All airlines are facing the same problem," he said, adding Lufthansa would decide what to do with its Sudan operation, a tiny portion of their global network, next April.

"We are talking to the central bank and to our bank but there is no chance to get the money out at the time being," Volz said.

Last November Sudan temporarily devalued the Sudanese pound to match the black market, hoping to bring more foreign currency into official trade and destroy the parallel market. So far it has met with limited success with banks still unable to meet the demand for foreign currency.

Sudan blamed the shortage on speculation related to situation in North Sudan after the South breaks away, as well as the fallout from the global financial crisis in 2008.

Figures of the International Monetary Fund (IMF) show that Sudan's central bank has limited hard currency at its disposal to intervene in the market.

Emirates, the Arab world's largest carrier also began to restrict ticket sales inside Sudan because of the Forex shortages. Foreigners must now pay in hard currency or by credit card. But Sudanese can only pay by credit card, which will reduce traffic because few Sudanese have credit cards.

"Many airlines will have to close down [in Sudan] if this continues," said economist and former finance ministry official Hassan Satti.

"The foreign currency situation is not going to improve." About a dozen foreign airlines fly to Sudan.

Sudanese law prevents airlines selling to nationals in foreign currency and U.S. sanctions imposed since 1997 stops credit card transactions, which leaves few options open to airlines other than to reduce or stop operations.

Under-Secretary of the Investment Ministry Awad al-Karim Balla said the measures had caused problems but they were temporary.

"We are cooperating with the [central] bank to make some solutions to this problem, and they promised to do so in the coming months," he said.

But airlines have not been given any date for an end to the restrictions to be able to plan around them.

Airlines may halt operations in Sudan
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