More airlines to take ‘drastic’ action, weigh options over trapped funds

• BA, Emirates, Delta, United make up 80% $450 million trapped fund,
• NANTA pleads with FG

Faced with the enormous amount of funds trapped in Nigeria, foreign airlines are monitoring the situation that could see them cut down drastically on their flight services.

The trapped revenue is said to be a result of a forex shortage, a sign that Nigeria is facing serious financial challenges.

The action has technically made airfares on international routes to be seen as expensive, whereas what the airlines have done is to close the lower airfare inventory by going to the cabin category on the same economy seats which are higher by as much as between 30 and 60 percent of what the fares should normally be.

British Airways, Delta, United, and Emirates, among others, collectively make up about 80 percent of the trapped funds. This is because they have the biggest sales since most people traveling to Britain, the United States, and the United Arab Emirates patronise them.

While Emirates took the painful decision to forestall the accumulation of debts owed them by the Nigerian Government, other airlines like British Airways, Lufthansa, Virgin Atlantic, and others are said to be monitoring the situation as efforts by the International Air Transport Association (IATA), the clearing house for global airlines to help repatriate the funds are said to have yielded no fruits.

The situation has forced carriers to have a rethink in a bid to cut their losses and minimize ‘loss’ of revenue not on the Nigerian routes, but in countries where over $3 Billion of their monies are trapped.

With over $450 million of airlines’ funds trapped in Nigeria, Emirates Airlines, the United Arab Emirates (UAE) flag carrier has become the first airline to cut its flight services to Nigeria to avoid the piling up of operational funds in the country.

The airline in a statement late Friday night said it would reduce its flight operations to Nigeria over the inability to repatriate about $85 million in revenue. 

The airline said this in a letter addressed to Hadi Sirika, Minister of Aviation, dated July 22, 2020, and signed by Sheik Majid Al Mualla, Emirates airline’s divisional senior vice-president (DSVP), international affairs. 

Emirates said the planned reductions in its operations in Nigeria would take effect from August 15, 2022

It added that flights would be reduced from 11 per week to seven per week at the Murtala Muhammed International Airport (MMIA).

“We have had no choice but to take this action, to mitigate the continued losses Emirates is experiencing as a result of funds being blocked in Nigeria,” it said. 

“As of July 2022, Emirates has $ 85 million of funds awaiting repatriation from Nigeria. This figure has been rising by more than US 10 million every month, as the ongoing operational costs of our 11 weekly flights to Lagos and five to Abuja continue to accumulate.”

 It said the funds are urgently needed to meet its operational costs and maintain the commercial viability of its services to Nigeria. 

 “We simply cannot continue to operate at the current level in the face of mounting losses, especially in the challenging post-COVID-19 climate. 

Emirates did try to stem the losses by proposing to pay for fuel in Nigeria in Naira, which would have at least reduced one element of our ongoing costs, however, this request was denied by the supplier,” the statement reads. 

 This is reminiscent of what happened in 2016 when the United States-based carrier, United Airlines stopped operations when foreign airlines’ stuck funds hit $600 million.

An airline operator who spoke to Aviation Metric on condition of anonymity more foreign airlines are already weighing their stay options.

A worker with German carrier, Deutsche Lufthansa AG said its operations in Nigeria are now “closely monitored” in the light of circumstances.

Though British Airways (BA) has not yet responded to the situation, there are indications that the carrier is seriously monitoring the situation. The carrier and few other carriers have the largest amount of funds trapped in the country; a situation that has hampered their operations.

President, National Association of Nigeria Travel Agencies (NANTA),    Susan Akporiaye has expressed a deep concern over the decision by the Nigerian government to withhold foreign airlines’ $450 million funds, saying the situation poses a serious threat to the entire aviation industry.

Akporiaye said the carriers could resort to taking out lower inventory in the system resulting in a high cost of tickets from the Nigerian market.

Her words, “As Nigerians, we are patriotic and have presented our country well in the global travel industry and rightly felt disturbed that Nigeria is on the brink of a wrong narrative at the just concluded  International Air Transport Association (IATA) 78th Annual General Meeting (AGM) held in Doha, Qatar on the account of airlines trapped funds to which Nigeria is  Africa’s leading boggy boy”.

NANTA as a strategic concerned partner in the downstream aviation sector has over the years appealed to the government through the Central Bank of Nigeria and also through the ministry of Aviation to see to the possibility of reducing the humongous trapped funds which at the month of May 2022,  is estimated at well over $450 million”.

Wole Shadare