Lebanon’s national airline Middle East Airlines will stop accepting payments in US dollars from deposits in local Lebanese banks, said the Chairman of Middle East Airlines Mohamed Al-Hout in a new statement to the Financial Times.
He added, “We will start selling our tickets with fresh dollars” only, that is, dollars transferred from abroad and free of banking restrictions.
The reason is that “the dollar in local banks is equivalent to 40 percent of the dollar in the market,” according to what Al-Hout said, explaining that “continuing to accept local dollars is not commercially feasible because 85 percent of the airline’s expenses are in foreign currencies.”
Depositors can only withdraw their dollar savings at a rate of 3,900 Lebanese pounds to US dollar set by the central bank’s new trading platform.
The black market is currently the only source of cash dollars or fresh dollars locally, the exchange rate in the black market is trading at around 8,300 Lebanese pounds to US dollar.
Thus, if depositors need to pay for a plane ticket according to the new airline policy, they would have to reach out to the parallel black market enduring a loss equivalent to 40 percent of their initial savings.
Despite the state’s financial collapse, the Lebanese government and parliament have so far refused to pass a capital control law, which experts say is critical to preserve Lebanon’s dwindling dollar reserves and apply withdrawal and transfer limits evenly.