• Tuesday, February 27, 2024
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Airlines, travellers adjust as trapped funds up 364%

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Foreign airlines are taking measures to cushion the effects of their trapped funds in Nigeria, even as those travelling out of the country are adjusting to high costs of tickets.

Airlines have since blocked low ticket inventories, leaving highest inventories to be sold in naira only while the low ticket inventories on most airlines’ websites can only be bought with dollar cards only.

Some passengers are already flying from Accra, Ghana to London, Canada and other frequently visited destinations in a bid to save costs as ticket prices in Nigeria have seen an increase of over 500 percent, while others are buying tickets from travel agents from other countries.

Emirates had last week announced that it would suspend all its flights from September 1, 2022, after the airline cut its operations from Dubai to Lagos from 11 per week to seven, due to its inability to repatriate its blocked funds from Nigeria.

In the last six months, foreign airlines have been unable to access their funds from tickets sold in the country as a result of foreign exchange scarcity and have resorted to buying dollars from the black market for as high as N680 to a dollar against the official rate of N429 to a dollar.

The trapped funds have since February grown from $100 million to over $ $464 million in July, according to the International Air Transport Association (IATA), making it very difficult for airlines to operate.

Read also: Explainer: Airlines’ trapped funds and the effects on travel

In a bid to mitigate the effects of the situation, foreign airlines started by blocking lower ticket inventories on their websites, making it difficult for passengers to buy affordable tickets. Ticket prices increased gradually from 50 percent to over 500 percent.

Industry stakeholders have said more airlines may suspend operations in the country as US airline United and Spain’s Iberia pulled out of Nigeria in 2016 when the blocked funds reached $600 million.

Kingsley Nwokeoma, president of Association of Foreign Airlines and Representatives in Nigeria (AFARN), told BusinessDay that if the government failed to work with foreign airlines to resolve the issue, it would affect the economy and would be a plus for neighbouring countries.

He said: “There are people who have been flying Emirates all their lives. Some of these people won’t mind going to Cotonou and still fly Emirates. For instance, Air France, KLM, and Lufthansa fly to neighbouring countries. These African countries are happy when things like this happen to us.

“When people fly to Ghana, it will boost their economy because when Nigerians travel to Ghana, they would stay in a hotel and would decide to spend on tourism there. Emirates has set the ball rolling and other airlines may take the same decision.”

Nwokeoma advised the Central Bank of Nigeria (CBN) to sit down with the airlines and try to see how they would pay part of the money to the airlines. “Boeing will not ask the airlines if people are repatriating money or not; they want their money paid,” he added.

The AFARN president said the amount of money being owed by the CBN “is embarrassing because it is a business these airlines are running and if there are no funds, it will definitely affect safety”.

He said: “Imagine if all other countries are not repatriating, then there will be no airlines. It is still from these monies that airline staff in Nigeria are being paid. Nigeria owes close to one billion US dollars scattered all around. It is more than what IATA stated.

“More airlines may suspend operations going forward. BA, Qatar Airways and some other airlines have reduced frequency, and if this continues, some airlines will close shop in Nigeria. The airlines are not making money and all the aircraft that are coming into Nigeria are still being paid for. These airlines have bills with Boeing and Airbus and all other manufacturers. So, if we are going to be an impediment, then they will have to stop coming here.”

Already airlines are taking other measures to ensure more of their funds are not trapped in Nigeria.

For instance, almost all airlines have blocked their low ticket inventories and are only selling high inventories, making fares very high.

Nigerians can however purchase the lower inventories using their dollar card. This implies that without a dollar card, passengers cannot get cheap tickets.

BusinessDay’s findings show that there are over 16 foreign airlines operating in Nigeria, with almost all doing at least one daily flight into Nigeria.

Emirates has the largest frequencies, with 11 weekly flights into Lagos which was recently reduced to seven flights, and seven weekly flights to Abuja.

Emirates carries an average of 350 passengers per flight. For 11 flights from Dubai to Lagos, the airline carries 3,850 passengers. To operate a return flight, the airline would carry an average of 7,700 passengers weekly on the Dubai-Lagos route.

With the reduction of flight frequency to seven, it means the airline now carries an average of 4,900 passengers weekly on the same route.

Experts say the remaining 2,800 passengers would have to jostle for flights on Ethiopian Airlines, Egypt Air, Etihad Rwanda and Air Peace, which fly directly to Dubai or connect passengers to Dubai.

If the airline suspends operations, it would mean 7,700 passengers would have to jostle for other carriers weekly with reduced frequencies and capacity, thereby causing a strain on international travel in Nigeria.

Susan Akporiaye, president of the National Association of Nigeria Travel Agencies, told BusinessDay that if the federal government failed to wade into the situation, other airlines may also suspend flights.

Akporiaye said IATA’s latest publication implied that more airlines may have to suspend too and this would benefit other African countries because more passengers will fly from those countries.

IATA, on Thursday, expressed disappointment with the Nigerian government for the continued withholding of foreign airlines’ revenues, which prompted Emirates to stop flying to Nigeria.

“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 many warnings that failure to restore timely repatriation will hurt Nigeria with reduced air connectivity are proving true with the withdrawal of Emirates from the market,” Kamil Alawadhi, IATA’s Regional Vice President for Africa and the Middle East, said.

“Airlines cannot be expected to fly if they cannot realise the revenue from ticket sales. Loss of air connectivity harms the local economy, hurts investor confidence, impacts jobs and people’s livelihoods. It’s time for the Government of Nigeria to prioritise the release of airline funds before more damage is done.”