IATA absolves self of skyrocketing fares from Nigeria, says fares dominated in USD

 

 

The International Air Transport Association (IATA) has exonerated itself from the skyrocketing airfares in Nigeria, attributing the exchange rate applied to international flight tickets sold in Nigeria as the reason for the high cost of fares from Nigeria.

It also noted that fares are not determined by IATA, saying that it is incorrect to describe them as the “IATA exchange rate”.

IATA

The clearing house for over 290 international airlines disclosed that airfares for international flights from Nigeria are denominated in US Dollars and converted into Naira, the local currency, for sale in the Nigerian market.

These conversions, it said use the official prevailing exchange rate provided by the country’s financial system.

It however noted that IATA simply applies the spot rate at which the Central Bank of Nigeria sells USD through banks to the market, at its fortnightly retail foreign exchange auctions.

“The rate is not static, i.e. if the rate at which the CBN sells USD goes up, the exchange rate applied to airfares will follow and vice versa. “

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Aviation Metric had exclusively reported the skyrocketing prices of air tickets following the rise in exchange of N770/$. Since Wednesday when the IATA rate of Exchange (IROE) increased, passengers from Nigeria have had to pay more for fares to any part of the world from Nigeria.

The International Air Transport Association (IATA), the clearing house for more than 290 global airlines would from Wednesday quote ticket prices at N770/$1.

At the new IRoE, registered by the Global Distribution System (GDS), a six-hour Lagos-London Economy class ticket sells for between N1.3 million to N2.5 million plus – subject to the airline of choice, place, and time of booking. Its Business class variant sells for between N3.36 million to N4.8 million.

While stakeholders regretted that the development has further pushed international air travel beyond the reach of average Nigerians, they acknowledged the inherent respite on foreign airlines that are patronising the Investors and Exporters (I&E) FX window for fund repatriation, and reopening of naira inventories to travel agencies in the countries.

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There are high hopes that foreign airlines’ stuck fund issues with Nigeria may be a thing of the past following the new I&E.

Kamil Al-Awadhi, Regional Vice President of Africa & Middle East for IATA who spoke to recently at the IATA 79th Annual General Meeting (AGM) in Istanbul, Turkey said that the rapidly rising levels of blocked funds are a threat to airline connectivity in the affected markets, noting that the industry’s blocked funds had increased by 47% to $2.27 billion in April 2023 from $1.55 billion in April 2022.

The IATA chief disclosed that Nigeria was cooperating with IATA and showed readiness to address the matter until six months ago when the CBN backpedaled on the matter, thereby, putting the carriers in a tough situation.

He said, “Airlines cannot continue to offer services in markets where they are unable to repatriate the revenues arising from their commercial activities in those markets. Governments need to work with industry to resolve this situation so airlines can continue to provide the connectivity that is vital to driving economic activity and job creation.”

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He listed the top six countries that account for 68.0% of blocked funds as Nigeria ($812.2 million);  Bangladesh ($214.1 million); Algeria ($196.3 million), Pakistan ($188.2 million), Lebanon ($141.2 million), Ethiopia ($125 million)

Kamil Al-Awadhi

IATA ​​​​​urged governments to abide by international agreements and treaty obligations to enable airlines to repatriate these funds arising from the sale of tickets, cargo space, and other activities.

Al-Awadhi appealed to President Bola Ahmed Tinubu to direct the Central Bank of Nigeria (CBN) to hasten the release of airlines’ funds, stressing that the whole process to help the carriers to repatriate their funds stalled six months ago when all arrangements had been put in place by the administration of former President Muhammadu Buhari and the attitude of former CBN Governor, Mr. Godwin Emefiele.

 

 

 

Wole Shadare