(Adds quotes, more airlines)
By Raya Jalabi
ERBIL, Iraq, Sept 27 (Reuters) - The Kurdistan Regional Government (KRG) on Wednesday rejected an Iraqi central government ultimatum to hand control of its international airports to Baghdad after Kurds voted to create an independent state in a disputed referendum.
The escalating crisis threatened to strand expatriates, diplomats and aid workers stationed in Erbil, the seat of the autonomous Kurdish government and a hub for humanitarian activities in northern Iraq.
Reacting to the referendum held on Monday, Iraqi Prime Minister Haider al-Abadi demanded the Kurds cede control of the Erbil and Sulaimaniya airports by Friday or face a suspension of direct international flights to and from the region.
KRG Transport Minister Mowlud Murad said he would not give into the ultimatum and that he hoped to resolve the crisis through dialogue with his Iraqi counterparts.
Abadi's decision "will hurt Kurdistan's economy," he said.
Murad added that retaining control of the airports and keeping flights to and from the capital was important for the continuing fight against Islamic State militants.
The Iraqi Civil Aviation Authority (CAA) notified international airline companies on Wednesday that international flights to and from Erbil and the region's second-largest city, Sulaimaniya, would be suspended from 1500 GMT. Only domestic flights run by Iraqi carriers will be allowed to continue operating.
In accordance with the Iraqi CAA's directive, regional airlines began altering their flight schedules.
Lebanon's Middle East Airlines said it would shelve its daily flight to Erbil, which has a sizeable Lebanese community. Egypt's flag carrier EgyptAir said it would also suspend flights starting Friday, two company sources told Reuters.
Meanwhile, Turkey's budget carrier Pegasus said it would stop accepting bookings for flights to Erbil, though it has not yet cancelled flights. Before doing so, the airline said it would await a decision from the Turkish CAA.
Flydubai’s flight to Erbil on Friday will operate according to schedule, a spokesperson for the carrier said. It is scheduled to land ahead of the planned suspension.
"We are aware of the situation and are liaising with our local representative regarding our operations from 30 September," the spokesperson said.
Last week, Iran said it would halt flights to Kurdistan at the request of the Iraqi government. Among other airlines flying to Erbil are Qatar Airways, Royal Jordanian, Turkish Airlines and Austrian.
At Wednesday's press conference, Transport Minister Murad said he as yet had no concrete advice for foreigners in the region.
Nevertheless, people began making plans to leave, as the suspension looked increasingly likely to take effect on Friday.
Haqm Fares and Zakaria Qais, two Iraqi students who were visiting family in Dohuk, were set to leave for Amman, Jordan next week.
"We changed our flights as soon as we heard there could be an issue with the airports closing down," Haqm told Reuters at Erbil airport. "We're university students in Amman, and were worried we would miss our classes." (Reporting by Raya Jalabi in Erbil. Additional reporting by Sarah Dadouch in Beirut, by Ezgi Erkoyun in Istanbul, Nadine Awadalla in Cairo and Sylvia Westall in Dubai; Writing by Maher Chmaytelli; Editing by Mark Heinrich)