KLM Cuts Cairo

Uncertainty about the Egypt‘s economic future has pushed KLM to cease service to Cairo as of January 2017. The Dutch carrier issued a statement this morning announcing the move:

For economic reasons, KLM Royal Dutch Airlines has decided to temporarily suspend flights to Cairo effective 8 January 2017. 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 final flight to Cairo (for the foreseeable future) will depart from Amsterdam on 6 January 2017, with the final flight returning to Amsterdam on 7 January 2017. After suspension of the KLM service to Cairo, Air France -KLM will maintain its presence in the Egyptian capital, with Air France operating six weekly flights out of Paris. Passengers with reservations to travel from Amsterdam to Cairo after 8 January 2017 will be rebooked to the most suitable alternative.

Airlines trimming service in times of economic weakness is hardly new. And by claiming the partner service on Air France as part of their own offering KLM can reasonably suggest it is just a temporary altering of frequencies rather than a wholesale abandonment of the market. More significant, however, is mention of foreign currency flow restrictions.

The global aviation market has been hurt badly in recent years by similar currency restrictions around the globe. More than $5.5 billion of airline money is trapped by these rules; the bulk of it is in Venezuela but other African countries have joined the list of offenders, including Nigeria, Angola, Sudan and – of interest here – Egypt. In June IATA released numbers suggesting that nearly $300mm was stuck in Egypt since the beginning of the year.

Getting past that currency repatriation challenge will be rough and with faltering demand on top of the currency woes, well, dropping the flights is likely a prudent business decision.