Pilot strike threat exposes fault lines of Maldives' currency crisis

"It is a misconception that we are seeking profit."

But when TMA decided that 20 percent of US dollar salaries would be paid in Maldivian Rufiyaa, staff felt they had no choice but to threaten a strike that could have brought the tourism industry to a standstill.

As the black market rate for dollars reached a record high of MVR 20.20 last week – a 31 percent premium above the official rate of MVR 15.42 – the TMA staff became the target of growing public frustration and resentment towards dollar earners.

Some argued that no Maldivian worker should be paid in US dollars, which they could sell in the parallel market. Others suggested the striking pilots should be fired and replaced with unemployed local pilots. Some even called to nationalise TMA.

"It is not as simple as people think to become a seaplane pilot," said the TMA pilot who spoke to the Maldives Independent, addressing the outrage on social media. "It requires additional training, a type rating examination and hours of dedication. These pilots are extremely skilled at what they do, and would not be easy to replace."

For years, TMA paid pilots and staff their monthly wages in US dollars. The staff were informed of the change last month.

"We received an email on June 22 saying that contracts will be amended and that 20 percent of salaries will be paid in Rufiyaa. All of us decided that we will not sign the contracts, and that we will strike," said the pilot, who spoke on the condition of anonymity.

"None of us really wanted to strike. But we were really left with no choice. All of us decided that it was necessary to protect our rights and income."

The threat worked. On Sunday, less than 48 hours after pilots and staff gathered to plan the unprecedented industrial action, TMA reversed course and agreed to continue paying all their employee wages in US dollars.

It was a rare win for collective action in the Maldives. But the averted strike was only the latest flashpoint of a controversial policy to force tourist operations to covert a portion of US dollars income.

A new foreign exchange law enacted in January made it obligatory for tourism businesses to exchange 20 percent of foreign currency earnings with local banks. As of May, banks must sell 90 percent of these dollars to the central bank.

As the government desperately seeks to build up foreign currency reserves against massive upcoming debt payments, experts blame the mandatory dollar surrender for worsening the parallel market squeeze.

"All of this ultimately stems from a Rufiyaa surplus that TMA has as a result of the dollar conversion policy," the pilot explained. "They do not know what to do with all the converted Rufiyaa."

Aside from tourist establishments, the forex law also requires businesses that earn more than US$ 15 million annually to convert 20 percent of monthly foreign currency receipts. 

Resorts and large corporations like TMA previously exchanged the minimum amount required to cover operational costs. But most businesses are now left with unwanted Rufiyaa that they have been trying to offer employees and vendors.

"We know that TMA offered to pay fuel, rent and other fees owed to MACL [the state-owned Maldives Airports Company Ltd] in Rufiyaa instead of dollars. But they refused to accept payment in Rufiyaa. So the management had to find something useful to do with the converted Rufiyaa. That's why they wanted to make the salary change, even though they did not want to," said the TMA pilot.

It is unclear whether the Velana International Airport operator has agreed to accept Rufiyaa payments for dollar-denominated jet fuel sales and other services.

Following TMA's reversal, domestic airline Manta Air cried foul over what it called inconsistent enforcement of the foreign exchange rules. Manta has been splitting salaries 50-50 between dollars and Rufiyaa since May, citing the same legal constraints that forced TMA's hands. 

"When a competitor that is heavily dependent on dollars decides to again pay 100 percent of salaries in dollars, questions arise about whether rules are being implemented uniformly," Manta said in a statement on Tuesday. "Giving exceptions and benefits to certain parties in the market would undermine the principles of fair competition."

The announcement followed reports of possible strike action by Manta's pilots. 

Manta also cited obligations to pay suppliers in dollars – including vendors for spare parts, software, aircraft and insurance as well as fuel and service payments to MACL – as a key factor behind the revised salary structure. 

The private airline said it remains open to reverting to 100 percent dollar salaries if the central bank and government makes concessions.

TMA operates the world's largest seaplane fleet with nearly 60 daily flights, accounting for 70 percent of VIA's airplane movements and serving as the primary mode of transportation between the country's main airport and nearly 100 resorts. 

"The Maldives' entire tourism model is built on seamless arrivals and departures, and a disruption in this system could jeopardise the country's reputation as one of the most reliable and luxurious travel destinations in the world," the Maldives Association of Travel Agents and Tour Operators warned before the standoff was resolved.

A TMA pilot strike would have stranded tourists, many of whom could have missed international flights and faced unplanned expenses, leaving resorts, travel agencies and airlines to "manage a crisis far beyond their control, including rebookings, compensation, and reputational fallout," it added.

MATATO stressed the need for "broader regulatory clarity regarding foreign currency regulations and their downstream effects on tourism operations."

A senior MATATO official from told the Maldives Independent that a strike could have led to "chaos" at resorts and the airport.

"Half of the 6,000 daily tourist arrivals at the airport rely on seaplanes to get to their holiday destinations. The bottleneck would have been disastrous," the official said.

"We need to bring all stakeholders to the table to find a permanent solution to the dollar issue. Without a permanent fix, the industry could continue to face issues such as this in the near future."