Budget airline Jetlink stops operations citing money scarcity

Friday November 16 2012

By Paul Wafula

Budget airline Jetlink Express has grounded all its planes after running out of money to run operations. The airline blames inability to access about $2 million of its revenue from ticket sales held in bank accounts in South Sudan.

"The board of directors of Jetlink Express regrets to announce the immediate suspension of all scheduled flights with effect from November 16, 2012,” a statement signed by the firm’s managing director Elly Aluvale read in part.

The management said it would send its 350 employees on leave pending resolution of the crisis. Passengers who had made prior bookings were notified of the flight cancellations.

We are a small airline and without that kind of money we cannot continue to operate. We will, therefore, remain closed until the government intervenes,” Mr Aluvale told the Daily Nation on phone.

South Sudan is currently facing a severe foreign-exchange shortage after it stopped exporting oil — its largest forex earner — following a spat with Sudan over oil-transit fees. The World Bank had projected that the country’s dollar reserves would run out by August.

The ten-month dollar crunch in South Sudan is having a toll on Kenyan companies operating in Africa’s newest nation. South Sudan is hoping that the recently-arrived-at deal with the North will allow oil to start flowing again, ending the dollar crunch.


Cross-border risks

The airline on August 27 wrote to South Sudan’s Central Bank governor requesting an “urgent allocation” of $3 million to help it fund daily operations into Juba, which are dependent on dollars.

It cited “unavailability of sufficient US dollars to cover jet fuel uplifts, aircraft lease rentals and imported aircraft spare parts which are repayable in dollars,” the letter addressed to Mr Kornelio Mayik, South Sudan’s Central Bank governor, read in part.

Mr Aluvale said the airline had been accumulating South Sudanese pounds in its accounts at Equity Bank and Kenya Commercial Bank, but the banks are unable to grant it any allocation of US dollars due to what it terms as currency and cross-border risks.

The airline needs about $500,000 per month to run its operations. Unable to access its money in South Sudan, Jetlink says it had to rely on soft loan advances by Equity and KCB against their deposit in Juba.

“Unfortunately our Kenya bankers have recently advised us that they will no longer be able to grant us any further accommodation against our increasing deposited sales…. This has left us in a situation where we are unable to meet short term obligations as they fall due,” the statement further read.

Jetlink is the first Kenyan airline to start operations in South Sudan in 2005. It is a wholly-owned Kenyan airline and operates scheduled domestic flights to Kisumu, Mombasa, and Eldoret and regionally to Juba and Mwanza.

The dollar shortage has seen Kenyan commercial banks in South Sudan make a killing through the sale of foreign currency.