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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.
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.
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