KLM suspends flights to Cairo amid country's currency problems

CAIRO, Sept 14 (Reuters) - KLM Royal Dutch Airlines (Other OTC: KLMR - news) will suspend flights to Cairo beginning in January as a result of Egypt's foreign currency problems, the company said in a statement on Wednesday.

Egypt is facing an acute dollar shortage that has stifled the ability of some companies to repatriate earnings and transfer money abroad, with many waiting in lengthy queues for allocations from the country's central bank and others resorting to an expensive black market for dollars that cuts into profits.

The country's net foreign reserves stood at $16.564 billion at the end of August, less than half the roughly $36 billion held in 2011 before an uprising drove away tourists and foreign investors, major sources of foreign currency.

The bank has sought to preserve forex reserves for essential items such as food, fuel, medicines and manufacturing components.

This has hit companies such as Air France-KLM (LSE: 0LN7.L - news) - the airline told Reuters in February it was unable to repatriate any earnings for months.

British Airways has said it faced similar problems, though it has not suspended flights to Cairo.

"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 (Shanghai: 600686.SS - news) ," a statement on the company's website said.

KLM's final flight from Cairo will depart on Jan. 7, the company said.

"After suspension of the KLM service to Cairo, Air France (Paris: FR0000031122 - news) -KLM will maintain its presence in the Egyptian capital, with Air France operating six weekly flights out of Paris," the statement added.

Air France and KLM Royal Dutch Airlines operate separate airlines as part of a joint airline group.

Egypt reached a preliminary agreement with the International Monetary Fund in August for a $12 billion three-year lending programme that could boost its reserves and plug its funding gap, but the deal requires Egypt to secure $6 billion in bilateral financing. (Reporting by Lin Noueihed; Writing by Eric Knecht; Editing by Alison Williams)