Kuwait Airways (KU, Kuwait) has pulled its flights to Sri Lanka after general sales agents (GSAs) and local airline offices fell behind on paying out foreign exchange income to the airline, according to Sri Lanka’s Sunday Times.

The airline made no official announcement, nor was it immediately available for comment. However, flights between Kuwait and Colombo Int'l, the capital of Sri Lanka, are currently not bookable on the airline's website, nor are any Kuwait Airways flights scheduled to Colombo at present.

The airline had only resumed operations to Sri Lanka in September 2021.

Sources in the know told the Daily Financial Times that Kuwait Airways’ “yields were also too low in comparison with the expense of operating the flight to Sri Lanka” where landing costs were deemed high.

The withdrawal is expected to last an extended period of time and will mostly affect migrant worker traffic from Sri Lanka to the Middle East.

This comes amid news reports from Sri Lanka that the country’s finance ministry has been asked to intervene to allow airlines operating to the country to repatriate blocked funds from the sale of air tickets, reports the Daily FT. Industry sources warned that general sales agents (GSAs) and local airline offices have for the last four to five months fallen behind on paying out foreign exchange earnings to their airline principals abroad.

Civil Aviation Authority of Sri Lanka Chairman Upul Dharmadasa told the Daily FT that airlines collectively had informed the regulator that Sri Lankan banks were not permitting outgoing foreign currency payments. He said the matter had now been referred to the Finance Ministry. “We were informed that the Treasury officials will speak to the airlines to resolve the situation,” he added. He declined any knowledge of airlines curtailing their services to Sri Lanka as a result of blocked funds.

According to flight-tracking sites, airlines currently operating to Sri Lanka include Emirates, flydubai, Air Arabia, Etihad Airways, Qatar Airways, Gulf Air, Air India, Vistara, Go First, SpiceJet, IndiGo Airlines, Singapore Airlines, Turkish Airlines, Oman Air, Air France, Aeroflot, Air Astana, LOT Polish Airlines, and Malaysia Airlines.

The Sri Lankan Board of Airline Representatives (BAR) also denied knowledge of more airlines preparing to pull out over the forex issue. “There is no reduction or plans of cutting down on the frequencies of airlines operating into Colombo at present,” the BAR Chairman Dimuthu Tennakoon told the Daily FT. “In fact, the capacities have increased significantly over the past few months.”

However, he acknowledged that the repatriation of forex was an issue. “We have had a few discussions with the authorities and raised our concerns with regard to the dollar rate. This is a matter which is still under discussion,” he added.

Meanwhile, the Sri Lankan Cabinet met on January 3 to decide whether or not to seek bailout funds from the International Monetary Fund (IMF). Lawmakers have been at odds over the issue, with some government ministers stating that even if they were to “die” they would not seek assistance from the fund, the Tamil Guardian reports.

The IMF last year ended a loan programme to Sri Lanka after disbursing USD1.3 billion of an agreed USD1.5 billion facility.

The country has been severely impacted by the pandemic and, through government mismanagement, has accumulated an estimated USD7.3 billion in domestic and foreign debt which would have to be repaid in the next 12 months. This includes a USD500 million international sovereign bond repayment due this month.