Dollar-priced tickets fail to free airlines’ trapped funds

Despite deploying several measures to ensure ticket sales are collected in dollars, airlines’ trapped funds in Nigeria have continued to rise.

Airlines trapped funds in Nigeria saw a sharp rise from $744 million in March to $802 million in April despite efforts to reduce the amount of money trapped in Nigeria.

In addition to these measures, National Association of Nigeria Travel Agencies (NANTA) recently disclosed that airlines were being paid their trapped funds little by little.

Stakeholders in the travel and aviation sector have said the trapped funds have continued to rise because airlines have tripled fares for passengers paying in naira.

For instance, a return ticket from Nigeria to London has risen in the last one year from N350,000 to about N1.5 million and N1.8 million (for passengers paying in naira).

While these fares have discouraged passengers, forcing many to use their dollar cards, others who don’t have this option buy from travel agents with naira at exorbitant rates.

“A Lagos-London return ticket that cost N350,000 is now being sold for N1.8 million. If you issue one economy class ticket, it should have been just N350,000 that is trapped, but now one economy ticket means N1.8 million is trapped.

“This means it will triple the effects of trapped funds because these are selling higher and because we are selling higher, the trapped funds are increasing but if we are selling N350,000, it should not have increased,” Susan Akporiaye, president of the National Association of Nigeria Travel Agencies (NANTA) told BusinessDay

Akporiaye explained that high fares is the reason the trapped funds will keep increasing.

She said in such a short time, the trapped funds have moved from $700 million to over $800 million because for instance a business class in the United States that was sold for N2.5 million is almost N6 million.

She said the government is not to be blamed for the increase in trapped funds but the airlines because payments of trapped funds are being made in trickles.

The NANTA told BusinessDay that the measures deployed by airlines to reduce ticket sales in naira have seen airlines recoup over 50 percent of their ticket sales in foreign currencies, thereby reducing the amount of money trapped in Nigeria.

Since last year, airlines stopped travel agents in Nigeria from issuing tickets emanating from other countries into Nigeria in a bid to reduce the amount of money that would be trapped in Nigeria.

The development has since seen Nigerian travellers bypass travel agents in Nigeria to purchase tickets from agents in Ghana and other African countries over skyrocketing fares as a result of the trapped funds.

Airlines also blocked low ticket inventories, leaving high inventories to be sold in naira only while the low ticket inventories on most airlines’ websites can only be bought with dollar cards only. This is in a bid to caution the effect of their trapped funds in Nigeria.

Delta Airlines, the sole US carrier flying into Nigeria from its base in Atlanta Georgia, has been selling air tickets from travellers in dollars. Jimmy Echelgruen, the airlines sales director for Africa, the Middle East and India, confirmed the development.

Read also: Dollar ticket sales grow as airlines sidestep trapped funds

Bankole Bernard, chairman of Airlines and Passengers’ Joint Committee of the International Air Transport Association, said that despite challenges facing Nigeria’s travel sector, foreign airlines operating in Nigeria realised over $1.1 billion from ticket sales in Nigeria in 2022.

Bernard, who disclosed this in a phone conversation with BusinessDay, said the foreign airlines are making good money from Nigeria, even though the trapped funds challenges still persist.

He said: “The airlines have sold more. In the whole of Africa, Nigeria sales are still the highest. We have done over $1.1billion in 2022. We are doing much better than our contemporaries.

“We are a good market and a market that any airline would want to come into. Nobody will talk about the good side of this market. Nigerians are still travelling. The only thing is that travel agents are losing business to outside the country. Most of us are buying tickets from other travel agencies from around the world.”

Travel experts say the ticket sales in 2023 will still increase because airlines have continued to make sales despite high fares.