Afghan government grounds Pamir Airways

Pamir Airways, an Afghan airline closely connected to Kabul Bank, has been shut down by the government in what one shareholder in the bank says is part of a political shut-down of assets tainted by corruption.

A Pamir Airways Antonov AN-24 waits for passengers at the airport of Kunduz, Afghanistan. Can Merey / EPA

An Afghan airline at the centre of a corruption investigation has suspended operations indefinitely.

Pamir Airways allegedly received improper loans from the country's largest private bank, which is currently being investigated by the central bank of Afghanistan and other authorities.

Pamir had been in operation since 1995, but it was taken over in 2008 by a group of businessmen including Sherkhan Farnood. Mr Farnood is alleged to have used his position as a shareholder and the chairman of Kabul Bank to grant loans to expand the airline, of which he was also the chairman.

Last year, revelations of Kabul Bank's investments in Dubai property caused a run on the bank that required the Afghanistan central bank to provide emergency funds and take over its operations.

Now, under pressure from international donors and countries involved in reconstruction efforts, the Afghanistan government has been analysing ways to increase regulation and rid the private sector of cronyism. The central bank is expected to announce a tender for consultancy firms to bid on a forensic audit of Kabul Bank in the coming weeks.

Mahmoud Karzai, the brother of the president of Afghanistan and a major shareholder in Kabul Bank, said yesterday that the government had shut down Pamir because of its connection with Kabul Bank. He said this could make problems at the bank worse because it would be unable to repay loans.

"No matter what the problem is, you don't shut down operations of a business if something is wrong," he said. "This airline is the national wealth of Afghanistan. Maybe you put a new management in place or restructure, but you don't just shut it down."

Mr Karzai has been connected to loans from Kabul Bank, including one that allowed him to earn a profit from quickly purchasing and reselling a villa on the Palm Jumeirah.

Mr Farnood, the former chairman of Kabul Bank, and Khalilullah Ferozi, the former chief executive, have both been sacked from their positions, but they are working with the government to track down loans they awarded to politically connected Afghans and other major businessmen. Neither man could be reached for comment.

The Afghanistan government has not officially connected the shutdown of Pamir with its investigation into Kabul Bank. An official at the ministry of transport and civil aviation said yesterday the punishment was a one-month suspension in response to "violations of regulations of Afghanistan", but would not give more information.

Masood Rasteen, a representative of Pamir in Dubai, also declined to disclose the nature of sanctions against the airline, except to say it "is in the government's hands". Customers who bought tickets in advance are being given replacements on Kam Air, another Afghan airline.

Pamir ran a daily flight between Dubai and Kabul, as well as operating routes to Delhi, Riyadh and some domestic locations.

It was involved in controversy last May when one of its passenger jets crashed into the Shakar Darah mountains, killing all 44 passengers.

The EU announced in November it would ban all aircraft regulated by Afghanistan from landing within its territories, saying such sanctions were imposed when airlines were unsafe or when a regulator failed to follow proper procedures.

Cleaning up Kabul Bank has become a major priority for the Afghanistan government because it has held up funding from the IMF and tarnished the image of its private sector.

Mr Karzai, who owns 7 per cent of Kabul Bank, said the previous management of the bank "did not only ruin Kabul Bank but ruined the private sector of Afghanistan".

"The crooks are everywhere and they are having the best time in their lives," he said. "We really need a strong hand of the law to come hard on those who are involved in criminal activities."