Market News

BY  Kelvin Osa Okunbor

Trapped funds by foreign carriers operating in Nigeria and other parts of Africa have hit over $1.68 billion, the International Air Transport Association (IATA), said yesterday.

 Its Regional Vice – President Africa and Middle East, Kamil Alawadhi , who disclosed this at the opening of the African Airlines Association annual general assembly taking place in Kampala, Uganda, said since 2018, a significant amount of blocked funds have been repatriated from Angola, Ethiopia, Ghana, Nigeria, and Zimbabwe through working with the respective governments.

 IATA in the last few years has been reaching out to the governments of some African countries to consider measures that will liberate foreign carriers blocked funds, which started since 2018, with a significant amount held back in Angola, Ethiopia, Ghana, Nigeria and Zimbabwe. As of January 2023, airlines’ blocked funds in Nigeria increased to $743,731, 027 from $662 million in January 2023 and $549 million in December 2022.

As of June 4, 2023 blocked funds of foreign airlines operating in Nigeria has risen to $812.2 million.

Alawadhi said liberating airline funds blocked by governments from repatriation has been a herculean task for IATA as it continuous to advise governments in African countries on best practices to clear the backlog of trapped funds.

He said: “Currently $1.68 billion in airline funds remain blocked across the continent. The second major issue plaguing Africa is blocked funds. As of September, $1.68 billion of airline funds are blocked across Africa out of $2.36 billion globally. The numbers are alarming and the impact of this on connectivity is devastating.

“Aviation is capital intensive. Cash flow is key for airlines’ business sustainability – when airlines are not able to repatriate their funds, it severely impacts their operations and impacts their decisions on where to fly.

“But the risk of blocked funds is not just limited to airlines; the negative impact extends to the countries blocking the funds. It impacts the country’s economy and its connectivity, and it hurts investor confidence and reputation. Aviation is not only an economic enabler, it is a pillar of modern economies. Governments must prioritize aviation and find sustainable solutions in the clearing of blocked funds, and we continue to offer our support in any way we can. Africa’s aviation industry is still recovering from significant losses due to the pandemic.

“To make up for this shortfall, governments should avoid imposing higher fees, levies, carbon taxes or new taxes on air transport, trade or tourism. These measures would only make air travel more expensive and less accessible in Africa, where the average airfare is already 30 percent  higher than the industry average and the jet fuel cost is 10-20 per cent  higher than the global average.

 “Higher costs would discourage customers who are sensitive to prices, resulting in lower demand and revenue for airlines and other stakeholders in the aviation sector, such as airports, ground handlers, suppliers and air navigation services.

 “They would also hamper economic development and limit the opportunities for job creation and income generation. High cost leads to high price, which reduces demand and growth in a price elastic market, and ultimately affects connectivity negatively.

 “The message is clear: governments should follow ICAO’s policies on charges and infrastructure and consult with airlines and industry to ensure a fair and cost-effective operational environment that benefits a more connected continent.”

 Alawadhi said IATA is deeply worried over the state of the air transport sector in Africa, where airport and other navigational charges pose problems for users of such facilities.

 He said: “Infrastructure in Africa comes with a high price tag; user charges across the continent are  eight per cent  higher than the industry average. Infrastructure charges must be set at levels that are fair, justified, and reflective of a value service proposition for airlines and passengers. Efforts through a pan-Africa fuel campaign have resulted in charge reductions in Chad, the Ivory Coast and Zambia over the last five years.”

 He said for over 55 years, IATA and AFRAA have been partners in supporting the development of air connectivity in Africa.

 Alawadhi said: “We have worked together with our member airlines through many good times. We have found great strength in partnership through far too many crises. And whether we are in good times or in crisis, nearly every day, IATA and AFRAA are collaborating to help its members.”

 Recently, IATA disclosed that Nigeria owes $812.2 million out of $2.27 billion trapped funds, making it the country with the highest trapped funds globally.

 The association warned that rapidly rising levels of blocked funds are a threat to airline connectivity in the affected markets.

 IATA warned that rapidly rising levels of blocked funds constitute a threat to airline connectivity in the affected markets.

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 According to IATA, the industry’s blocked funds have increased by 47 per cent to $2.27 billion in April 2023 from $1.55 billion in April 2022.

 It also said five countries account for 68.0 per cent of blocked funds with Nigeria topping the chart.