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HomeNewsAfricaCrisis Looms As Foreign Airlines Mull Pull-Out Over Blocked Funds

Crisis Looms As Foreign Airlines Mull Pull-Out Over Blocked Funds

There is an indication that if issues around foreign airlines’ trapped funds are not addressed in the coming days, more international carriers may be forced to suspend their flights to Nigeria.

Some of the affected foreign airlines include: British Airways, Delta, United and Emirates, BA, Lufthansa, AWA, etc. Collectively these airlines make up about 80 percent of the trapped funds. This is because they have the biggest sales since most people travelling to Britain, the United States and United Arab Emirates patronise them.

Consequently, there is reduced capacity and air fares have become more expensive. This is due to the fear that Nigeria may devalue its currency, which will invariably put the airlines at a loss of a huge percentage of the money they intend to repatriate.

Already, Emirates Airlines has announced that it will suspend all flights from Nigeria, effective from September 1, 2022.

The airline stated that it has tried every avenue to address their ongoing challenges in repatriating funds from Nigeria, and that they have made considerable efforts to initiate dialogue with the relevant authorities for their urgent intervention to help find a viable solution but not with any success.

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.

IATA, on its own, has already expressed its disappointment on Nigeria’s continuing withholding of foreign airlines’ revenues.

Reacting to the situation, Kamil Alawadhi, IATA’s Regional Vice President for Africa and the Middle East said “IATA is disappointed that the amount of airline money blocked from repatriation by the Nigerian government grew to $464 million in July.

“This is airline money and its repatriation is protected by international agreements in which Nigeria participates. IATA’s warning that failure to restore timely repatriation will hurt Nigeria with reduced air connectivity is proving true with the withdrawal of Emirates from the market. Airlines cannot be expected to fly if they cannot realise the revenue from the sale of tickets. Loss of air connectivity harms the local economy, hurts investor confidence, impacts jobs and peoples livelihoods. It is time for the Government of Nigeria to prioritise the release of airline funds before more damage is done,” he said.

Industry experts are, however, not pleased with the appalling handling of the accumulated foreign airline funds trapped in Nigeria banks, due to the non-allocation of forex to these airlines.

In all Bilateral Air Services Agreement an Article in the agreement — transfer of earnings, clearly states that “each designated airline shall have the right to convert and remit to its country on demand, local revenues in excess of sums locally disbursed. Conversion and remittance shall be permitted without delay in accordance with the prevailing foreign exchange regulations”.

These experts, acting under the aegis of Aviation Round Table therefore, opined that international trade is bound by agreements, which are sacrosanct and respected, insisting that Nigeria cannot do otherwise if they crave the attention of investors in our industry.

Part of what triggered the blocked funds, according to them, is caused by lack capacity to compete, which would have reduced the remittance volume.

“It Is important to state that foreign airlines sold these tickets at the official IATA rate and cannot be expected to go the parallel market to source, convert and remit as opined in some quarters, the central bank should do the needful as enshrined in the BASA agreements”.

They suggested that the funds should have been remitted at the official rate on date of Sale immediately the Airlines get clearance after paying all the local obligations including taxes.

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“The damage that our action has done to the Nigerian image as an investment friendly nation is far reaching, while the citizenry is faced with high fares, reduced capacity and limited travelling options, which will worsen if we continue on this trajectory”, they added.

In his submission, Mr. Bankole Bernard, the Group Managing Director, Finchglow Holdings, said there should be a communiqué from the government, which will give them some assurances that the country is not planning to devalue and this won’t affect them and that they will repatriate their money as it were.

“It is very important that when things like this happen, there is room for communication especially from the government. In business, you will always have an exposure and the exposure is the fact that your money is tied down, but you know you are always going to get it because it’s a credible country, but when your money is tied down and it will eventually lose value, then, the agitation will be more”.

Meanwhile, a section of the industry has excoriated Emirates Airlines over its decision to suspend its operations to Nigeria from September 1, 2022, saying that it is a subtle pressure on the government to release dollars that are obviously unavailable.

These industry observers said that, the reason why the Central Bank of Nigeria (CBN) has been unable to pay the blocked fund was because the government does not have money; that blocked fund has been a challenge in Nigeria since 2015.

They also observed that while the airline singled out Nigeria, there are other countries that have been unable to allow airlines to have this fund, adding that there is global economic meltdown, which is exacerbated by the Russia-Ukraine war.

“Please do not succumb to the blackmail of Emirates and their sponsors from within. The country cannot and will not manufacture dollars for them to repatriate their so called over $80 million in Nigeria. When they were competing devilishly to outdo an indigenous, the only airline doing direct flight to Dubai, didn’t they know of the dollar situation here before embarking on having multiple frequencies into Nigeria. They do two flights out of Lagos daily and one out of Abuja daily, bringing the total to three daily flights into Nigeria and 21 flights every week,” said one of the stakeholders, who also remarked that at the time the airline increased its frequency, there was no passenger traffic to justify it.

“Once they heard a Nigerian airline was about to start flying to Dubai, they applied to increase the Lagos frequency to three flights daily, just to stifle the airline out and dominate the route. They didn’t need all these flights but they increased frequency to stifle competition. Nigerians are even angry at the figures they are publishing; they feel having been ripped off by Emirates,” stakeholder said.

An operator who expressed his fear about the impact of what he referred to as subtle blackmail of the government said, “The pressure is on and sooner rather than later the government will succumb and release millions in forex that is supposedly scarce to foreign operators that create and sustain jobs in their respective countries. $600m! Why not? Who does not want to travel abroad? This is a huge subsidy to them in addition to the obscene fares they charge Nigerians which obviously have discounted the Naira at 800/$! Check it.

“Yet domestic operators cannot get forex to buy spares and pay for their leases or buy aircraft. Yes, how much do we really need? Nothing compared to the direct subsidies given to foreign airlines. Government should support Nigerian aviation investors, who create and sustain millions of jobs here. Airline Operators of Nigeria (AON) should also mount pressure to ensure that these monies are not paid to foreign airlines, while order priorities suffer,” he said.

Some of the stakeholders canvassed that what the government should do is to approve that airlines should sell their tickets in foreign currency.

“Time for a step back and reassessment…. How come the airlines can’t repatriate their sales? Is it that they desire Dangote dollars as opposed to market dollars? This begs the statement of the CBN. We are not the source of delays in repatriation. Everyone on international flights carry dollars, Euros, Yuan, Rand, Dirham. So, why aren’t the airlines converting their naira sales to transfer? Waiting for the banks? Daily the banks are trading market dollars. Here is a case of, how are domestic airlines getting the fx. This is now a case of don’t cry for me Argentina.

“The real story therefore affects all sectors of the economy … foreign airlines are asking for special treatment. We can’t therefore be blamed if domestic airlines are better at the price mechanics that make them more successful on the routes suspended by foreign carriers. For me I’m going to stop saying funds are trapped, they aren’t. Air Peace should step into the gap voluntarily exited by Emirates, our media must also counter the foreign narrative that funds are trapped,” he said.

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