Suspended Afghan airline 'owes Kabul Bank $90m'

Kabul Bank lent more than 90 million dollars to Pamir Airways, the airline that was shut down by the government on March 7 because of violations of regulations.

Pamir Airways, the airline suspended this month by the Afghanistan government, owes more than US$90 million (Dh330.5m) to Kabul Bank, according to an official from the airline.

The bank was last year taken over by the government and injected with emergency funds after it was alleged the bank's top executives had authorised improper loans to shareholders and politically connected people. Thousands of customers tried to remove their savings, causing a crisis in the country's financial system.

Sherkhan Farnood, Kabul Bank's former chairman, and Khalilullah Ferozi, the former chief executive, used money from the bank to take over Pamir Airways and to increase its routes.

But government regulators claim they uncovered evidence of forged documents and faulty flight recorder equipment as part of an investigation into a crash last May in the mountains near Kabul that killed all 43 people on board.

The situation means that while one arm of the government is trying to recover the alleged improper loans made by Kabul Bank, another is reducing the viability of one of the largest debtors from paying the money back. Bad loans at Kabul Bank could reach as high as $900m, according to some estimates.

Daoud Ali Najafi, the acting aviation minister in Afghanistan, said yesterday he had shut down Pamir Airways for a month to give it time to respond to his allegations that the company was flying a plane with forged documents, among other issues. "They have broken our regulations," he said from Kabul.

The purchase documents from Bulgaria for the Russian-made Antonov aircraft were found to be forgeries and the flight recorders were disfunctional, Mr Najafi said, adding the airline also had not fulfilled its promise to pay compensation to the families of each victim.

"We gave one month's time to Pamir," he said. "If they make any correction, then we will allow them to start flying.

"If they do not take any corrective measure, then we will revoke their licence."

A source close to Pamir Airways, who declined to be identified because of the sensitive political issues involved in the dispute, said the Afghan government had shut down the airline "indefinitely".

Of the airline's five planes, two are in Afghanistan, with the others in Dubai, the UK and Belgrade. Staff were not being paid and pilots and engineers were beginning to leave the company, the source said. "They forced Pamir as an entity from an airline into a metal graveyard," the source added.

The airline bought the plane from Bulgaria's Aviostartearly last year for $485,000, according to the deed of sale.

Pamir's insurance provider, Kapital Insurance of Russia, has disputed its obligation to pay for the victims of the crash, which has hurt the company's ability to make payments of about $155,000 to the family of each victim, the source said.

Meanwhile, Safi Airways, another Afghan airline, has maintained in meetings with the transport and civil aviation ministry that it followed all safety procedures and did not take short cuts with its fleet, the source said.

Politics has already threatened to interfere with the regulatory action. After the ministry first announced the one-month suspension, the vice president's office overruled the decision and said Pamir could continue operating. But the cabinet overturned that decision a day later .

One of Kabul Bank's major shareholders is Haseen Fahim, the brother of Mohammed Fahim, the Afghan vice president.

The airline travails are having wider impacts on the economy. The IMF has delayed aid to Afghanistan as the corruption investigation continues, which in turn has pushed back aid from other donors including the UK.

"There are two problems now confronting each other in Afghanistan," said Khalid Pashtoon, a member of parliament from Kandahar province. "The airline problem and the bank problem … The other day I met with the central bank governor and he said his case was very serious. There could be serious penalties."