Summary
- Airline funds trapped globally have been reduced by 28% to stand at $1.8 billion in April 2024.
- Nigeria cleared 98% of funds previously blocked, showing significant progress.
- Emirates will finally resume flights to Nigeria after services were suspended due to blocked funds.
Over the last six months, the amount of airline funds blocked globally has been reduced by 28%. The progress was mainly driven by the clearing of funds in Nigeria, which was the most notorious for blocking airline funds for many years.
Repatriation of blocked funds
In its latest update, the International Air Transport Association (IATA) reported that airline funds trapped by governments worldwide stood at approximately $1.8 billion at the end of April 2024, a 28% reduction from December 2023. Governments have managed to clear about $708 million over the past six months, representing a positive development for the industry.
Photo: motive56 | Shutterstock
Nigeria has made significant progress since June 2023, clearing about 98% of blocked funds. This has been one of the biggest challenges and a significant threat to connectivity in the West African country. While progress has been made globally, the remaining $1.8 billion is a substantial amount that still needs to be addressed. IATA Director General Willie Walsh said,
“The reduction in blocked funds is a positive development. The remaining $1.8 billion, however, is significant and must be urgently addressed. The efficient repatriation of airline revenues is guaranteed in bilateral agreements. Even more importantly, it is a pre-requisite for airlines—who operate on thin margins—to be able to provide economically critical connectivity. No business can operate long-term without access to rightfully earned revenues.”
The association continues to call for governments to remove all barriers to airlines repatriating their revenues from ticket sales and other activities in accordance with international agreements and treaties. In addition to Nigeria, Egypt also cleared a significant amount of blocked funds. However, in both countries, airlines were affected by the devaluation of the Nigerian Naira and the Egyptian Pound.
Related
US-Nigeria Air Transport Agreement Expected To ‘Open Skies’ Between The Two Nations
The agreement entered into force on May 13.
Nigeria clears 98% of blocked funds
Nigeria topped the list of countries with the most blocked funds for several months. The amount peaked at $850 million in June 2023, significantly affecting airline operations and finances in the country. However, IATA reports that 98% of these funds have been cleared as of April 2024. Only about $19 million remains uncleared due to the Central Bank’s ongoing verification of outstanding forward claims filed by the commercial banks.
Airlines operating flights in the West African country faced difficulties in repatriating revenues in US dollars, leading some to reduce services or suspend operations. In October 2022, Emirates, one of the leading international carriers in Nigeria, suspended all operations after failing to find solutions to repatriate trapped funds.
Photo: Emirates
However, the country’s new government has made significant progress in resolving the issue. Last year, the president’s special advisor announced that Emirates would resume flights to Nigeria, while the UAE lifted the Visa ban on Nigerian nationals. While the situation remained unchanged for the following months, Emirates finally announced the resumption of flights from Dubai to Lagos in May 2024. Speaking about the development in Nigeria, 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.”
The progress in Nigeria is also a positive development for the African continent, which had 75% of the world’s blocked funds in October 2023. According to IATA, eight countries are currently responsible for 87% of the total blocked funds, amounting to $1.6 billion. These include:
|
No. |
Country |
Amount |
Month Held |
|---|---|---|---|
|
1 |
Pakistan |
$411 million |
40 |
|
2 |
Bangladesh |
$320 million |
40 |
|
3 |
Algeria |
$286 million |
37 |
|
4 |
XAF Zone |
$151 million |
50 |
|
5 |
Ethiopia |
$149 million |
58 |
|
6 |
Lebanon |
$129 million |
52 |
|
7 |
Eritrea |
$75 million |
116 |
|
8 |
Zimbabwe |
$69 million |
84 |
Related
Nigeria & Ethiopia Have Swapped $100 Million Of Blocked Airline Funds
Ethiopian Airlines can receive a significant amount of trapped funds through the swap deal.
African airlines profitability
On June 3, IATA announced strengthened profitability projections for airlines in 2024 compared to its June and December 2023 forecasts. Net profits are expected to reach $30.5 billion (3.1% net profit margin) this year, an improvement on 2023 net profits (3.0% net profit margin), estimated to be $27.4 billion. It has also improved from the $25.7 billion (2.7% net profit margin) forecasted for 2024 in December 2023.
Photo: Markus Mainka I Shutterstock
In Africa, airlines are expected to post a combined net profit of $0.1 billion, with a 0.6% profit margin and a $0.9 profit margin per passenger carried in 2024. African airlines continue to face high operational costs, while the continent has a low propensity to spend on air travel. Furthermore, the lack of connectivity and several other challenges stifle the industry’s expansion. Despite the challenges, demand for air travel has grown by 8.5%, allowing for a second year of profitability.
What are your thoughts on this story? Please let us know in the comments!