Forex scarcity:Ethiopian Airlines mandates dollar-only ticket purchases
Due to the excruciating shortage of Foreign Exchange that has hit Ethiopia for more than one year, the country’s national carrier, Ethiopian Airlines has announced that airline tickets for passengers outside the country will now only be available for purchase in US dollars.
Previously, air transport tickets for international travellers could be bought using Birr, Ethiopia’s currency if they come to Addis Ababa.
The implication is that the situation could impact the carrier and once again bring to the fore different policies of many nations including Nigeria that forbids transaction in any other currencies than the Naira.
The new policy will affect companies with the issue of limited dollar availability. Concerns have been raised about the potential impact of this decision, with sources indicating that it could significantly affect their operations.
A travel expert and entrepreneur, Mr. Tayo Ojuri hinted that the new policy won’t affect the carrier, adding that many airlines who use the online booking platforms already designed that tickets are paid for in dollars.
Some other experts said the new policy would help the carrier to avoid a situation where its funds are trapped and would find it extremely difficult to repatriate its huge trapped in Ethiopia, occasioned by acute Forex scarcity.
There are indications that the carrier equally wants to be competitive like other foreign airlines which fares are said to be more expensive compared to European carriers.
Traditionally, Ethiopia has allowed foreign tourists to purchase air tickets in local currency during their visits. However, under the new system implemented by Ethiopian Airlines, these purchases must now be made in dollars.
The inability of airlines to repatriate funds from ticket sales in Ethiopia is hindering the country’s economic growth and recovery citing industry leaders.
As of June 2024, Ethiopia had $115 million in airline funds blocked from repatriation, the third highest amount in Africa behind only Algeria ($261 million) and the CFA Franc Zone countries ($140 million). This represents over 13% of the total $880 million in blocked airline funds across the African continent.
“The blocked funds issue is a significant constraint on our ability to invest and operate effectively in the Ethiopian market,” said Kamil Alawadhi, IATA’s Regional Vice President for Africa and the Middle East. “It undermines confidence, limits route network development, and reduces the economic benefits that aviation can deliver for Ethiopia.”
IATA’s latest industry forecast projects that African airlines will return to profitability in 2024, earning a collective net profit of $100 million. However, this equates to just 90 cents per passenger – well below the global average of $6.14 per passenger. Alawadhi noted that the blocked funds crisis in countries like Ethiopia is a major factor holding back the aviation sector’s contribution to economic growth across the continent.
“Aviation is a catalyst for jobs, trade, tourism and economic development. But we can only fulfil that potential if governments ensure airlines can repatriate their revenues without unnecessary barriers,” said Alawadhi. “Resolving the blocked funds issue in Ethiopia and across Africa needs to be an urgent priority.”
Nigeria which had the highest amount of over $800 million in foreign airlines money recently paid the carriers, forcing the airlines to revert to the old order by opening lower ticket inventories.
The action forced a reduction in fares and gave many Nigerian travellers options for cheaper fares and choices. It helped to eliminate the idea of many travellers travelling to neighbouring countries like Ghana, Togo and Benin Republic for fares that were half the price of what was obtained in Nigeria.
Commending Nigeria for the release of the trapped funds, the Director-General of IATA, Willie Walsh said, “We commend the new Nigerian government and the Central Bank of Nigeria for their efforts to resolve this issue. Individual Nigerians and the economy will all benefit from reliable air connectivity for which access to revenues is critical. We are on the right path and urge the government to clear the residual $19 million and continue prioritizing aviation,” said Walsh.
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