Nigeria clears $600 million airlines’ trapped funds

From Wole Shadare Sydney, Australia

The International Air Transport Association (IATA) said it was encouraged by the recent developments in Nigeria where the Federal Government succeeded in clearing $600 million backlog of airline funds trapped in Nigeria.

The Director-General of IATA, Alexandre de Juniac in an interview with woleshadarenews at the 74^th Annual General Meeting (AGM) of the clearing house for over 280 global airlines confirmed that the country had indeed cleared the amount that led to crisis in the sector in 2016 which threatened the pull out of foreign airlines out of Nigeria.

De juniac, however called on governments to abide by international agreements and treaty obligations to enable airlines to repatriate revenues from ticket sales and other activities.

According to IATA, the amount of airline funds blocked from repatriation totalled $4.9 billion at the end of 2017, which was down seven per cent compared to year-end 2016. He however noted that airline funds remained blocked in some 16 countries.

He listed the top five markets with blocked funds as Venezuela, where airlines have been unable to repatriate $3.78 billion; Angola, where approximately $386 million remains blocked; Sudan where $170 million is blocked; Bangladesh, where $95 million is trapped and Zimbabwe, where $76 million remains unrecovered.

His words, “The connectivity provided by aviation is vital to economic growth and development. Aviation supports jobs and trade and helps people to lead better lives. But airlines need to have confidence that they will be able to repatriate their revenues in order to bring these benefits to markets.”

“We have has some recent success. The $600 million backlog in Nigeria has been cleared and we made $120 million of progress from a peak of over $500 million in Angola. I encourage the government of Angola to work with airlines to help reduce this backlog further.”

He disclosed that given the deepening economic crisis in Venezuela, a resolution appears to be unlikely in the short term.

“We are encouraged by the recent developments in Nigeria and Angola and hope other states will also move quickly to address blocked funds”, he added.

At the height of the crisis in 2016, Spanish national airline, Iberia withdrew from Nigeria and is yet  to return.

 Followed in quick succession was United States carrier, United which stopped services between Houston and Lagos. Emirates scaled down its operations to daily flight into Lagos from the two daily flights it operated. The carrier stopped its Abuja operation.

Other carriers reduced capacity on the lucrative Nigerian route. Job losses in the aviation sector was unprecedented in the sector.

No fewer than 200 Nigerian employees of the foreign carriers lost their jobs within the period. Seriously affected by the trapped funds were Emirates, British Airways, Delta Air Lines, Air France-KLM, and Ethiopian Airlines.

Airlines’ funds were released in tranches until the government cleared the entire backlog. That singular situation brought sanity to the sector.

The reason for the scaling back or pulling out of the market was because of the impact of the depreciation of local currencies and the drop in oil and commodity prices in those countries.

So, in Nigeria, for example, they were forced to sell in the local currency, but, unfortunately, foreign currency was not readily available then for them to exchange and take it out of the country.

The clearing of trapped funds by the government has buoyed revived activities in the airline industry with some of the airlines that left in the aftermath of the crisis returning while many other foreign carriers have their applications with the Ministry of Transportation indicating their readiness to begin flight services to the country.

One of such airlines is Air Namibia which begins air services to Lagos from Windhoek on June 29, 2018. RwandAir is connecting more Nigerian cities. New routes are opening up both for domestic and international airlines.

Many, including the IATA chief noted that this indicated that the nation’s economy was strong and had rebounded.

Commercial Director, West and East Africa, Delta Airlines, Bobby Bryan, confirmed that his airline had cleared all its trapped funds in Nigeria.

Regional Commercial Manager for West Africa, British Airways, Kola Olayinka, also confirmed the clearance of the trapped funds.

“We have cleared all blocked funds in Nigeria. There are no more blocked funds for British Airways.  I can only tell you that we no longer have blocked funds in Nigeria and money is easily made available”.

The IATA chief described aviation as challenging industry in which to operate, noting that high taxes, costly and ill-conceived regulation, infrastructure capacity constraints, market shifts and the demands for labour are the normal repertoire.

Rising costs are equally said to be putting this under pressure, with robust profitability needed to reward investors, strengthen balance sheets and fund the growth of aviation jobs and its social benefits.

His words, “Aviation’s new-found financial health is rewarding consumers. With money to invest in new aircraft, the global network has grown to over 58, 000 routes. Airlines have invested to develop options that meet every travel budget, shipping requirement or business need. And as New Distribution Capability (NDC) modernises distribution, we can look forward to a future that caters even more closely to customer needs”.

Wole Shadare