Operations at local airline Jetlink have been grounded for lack of cash, which it blames on failure to convert into dollars revenue from its ticket sales in South Sudan.
Managing director Captain Elly Aluvale said they are unable to access more than $2 million banked in Equity and Kenya Commercial banks in Juba.
Subsequently its 350 staff have been sent home pending further communication.
The airline, he said, heavily depends on foreign exchange to buy fuel, aircraft lease rentals, importation of spare parts and landing fee.
"This has left us in situation where we are unable to meet our short term obligations as they fall due and particularly our fuel bill which constitutes close to 40 per cent of our operating costs," said Aluvale.
He said with foreign exchange shortage in South Sudan, banks are under instruction from the government to give priority to essential services like food, medicine and fuel imports in their foreign exchange allocation.
The currency shortage arises from the stand-off between Sudan and South Sudan over oil export transit fees forcing the South to stop refining its oil in Khartoum.
Aluvale said Equity Bank Kenya has been advancing them dollar payments based on Jetlink's deposits in Equity South Sudan pending resumption of normal foreign exchange trade in South Sudan.
"Unfortunately, our Kenyan bankers have recently advised us that they will no longer be able to grant us any further accommodation against our increasingly deposited sales in South Sudan citing currency and cross border risk considerations," said Aluvale.
Jetlink's bank statement as at 30th September shows that it had 6,791,850 Southern Sudan Pounds (approx $2 million) in its current account while its dollar current account had $19,460. The currency changes at 3.166 SSP to the dollar.
On August 27, the airline wrote to the South Sudan Central Bank Governor, Kornello Mayik requesting for an urgent allocation of $3million and monthly allocations of at least $500,000 to enable it clear its debts and fund monthly operations.
The appeal did not yield much and in October, Jetlink sought the intervention of Prime Minister Raila Odinga who communicated to the South Sudan Vice President Riek Machar.
Emmanuel Lowilla a minister in the Office of the President subsequently wrote to Equity Bank CEO James Mwangi requesting the bank to continue extending credit to Jetlink.
"The prevailing economic situation in South Sudan is temporary in nature and we will work together in managing the cross border risk," said the minister in a letter dated October 4.
South Sudan is expected to restart the oil flow which was shut down in January on November 21 following the signing of nine agreements between it and Khartoum on September 27 in Addis Ababa.