Lebanon’s national carrier, Middle East Airlines (MEA), recently came under heavy criticism for its decision to only accept payments in foreign currency. The backlash against the move was so strong that the airline reversed its decision just hours after it was first announced.
Yesterday was a chaotic day for Middle East Airlines, as it announced and then retracted a decision to no longer accept the Lebanese Pound/Lira, all within the space of a few hours. The airline has found itself stuck in between a rock and a hard place recently, as Lebanon’s economy spirals downwards into recession. After announcing it would no longer accept payments in Lebanese Pounds, crowds of passengers at Beirut Airport expressed their anger at no longer being able to buy tickets.
Why did Middle East Airlines reject the Lebanese Pound?
The Lebanese Pound has suffered a massive decline in value over the past six or seven months, specifically on the black market. Since 1997, the Lebanese Pound has been pegged to the US Dollar, which should, in theory, provide the Lebanese currency with some stability. But, as reported by Bloomberg, Lebanon’s economy has been struggling to compensate for a widespread outflow of capital from the country.
Back in August 2019, the black market value for one dollar was roughly 1550 Lebanese Pounds. But, after a considerable economic downturn, the black market exchange rate between the two currencies has dropped to around 2550 Lebanese Pounds per US Dollar. Not only has the value of the Lebanese Pound dropped significantly, but the black market exchange rate with the US Dollar has also been highly volatile, which is bad news for Lebanese businesses.
Pressure from above
Middle East Airlines’ decision to only accept foreign currency immediately drew criticism from both the public and the Lebanese government. But, bizarrely, Middle East Airlines is actually 99% owned by the Lebanese Central Bank. Not only did the airline find itself in a position where a decision taken to mitigate financial losses was opposed by its parent organization, but Lebanese law also states that air tickets must be sold in the local currency at the official exchange rate.
According to reports by Live and Let’s Fly, Lebanon’s President, Michel Aoun, warned the airline that it would face severe penalties for breaking the laws regarding ticket pricing.
What will happen now?
Now that Middle East Airlines has been forced to reverse its decision, it will be at the mercy of further swings in the black market value of the Lebanese Pound. This will result in further losses, as it is forced to accept a currency that will likely experience yet more decline in value over the next few months.
Simple Flying has reached out to Middle East Airlines with a request for comment on its reversal of the foreign currency-only policy. The airline has not yet been able to respond, but we will update this article once we receive more information.