Blocked funds owed to global airlines drop as Nigeria pays most of its dues

Total at the end of April stood at about $1.8 billion, Iata says

Murtala Muhammed International Airport in Lagos. Nigeria, whose blocked funds amounted to $850 million in June 2023, has paid off 98 per cent of its dues. Reuters
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The outstanding ticket sales revenue owed by governments to airlines around the world has fallen sharply as countries that had blocked large amounts, such as Nigeria, began to release the funds, according to the International Air Transport Association (Iata).

However, airlines will still want consistency in the continued repatriation of money before they resume flights, Iata's director general said.

Airlines need to have “a sense of guarantee that they are going to continue to get their money. It is not good enough that you got the money that belonged to you”, Willie Walsh told The National on Tuesday in Dubai, adding it is still an issue.

“Will airlines re-enter the market? They will want to see assurances that they will continue to be able to repatriate the money. Because they are not going to commit resources to restarting operations if the situation redevelops and the funds get blocked again,” he said.

The total global blocked funds at the end of April stood at about $1.8 billion, down by $708 million since December 2023, Iata said this week.

In Africa and the Middle East, blocked funds stood at $1.1 billion as of April, down from $1.9 billion at the same time last year, Kamil Al Awadhi, head of the Africa and Middle East division at Iata, said during a media briefing.

Nigeria, whose blocked funds amounted to $850 million at their peak levels in June 2023, has paid off 98 per cent of its dues, he said.

The remaining $19 million is due to the Central Bank’s continuing verification of outstanding forward claims filed by commercial banks, the airline lobby group said.

“Airlines are always cash-strapped, and when your money is trapped in multiple countries and you can't get it out, then it actually strangles the airline itself,” Mr Al Awadhi said.

“This is a challenging environment for the aviation industry and adding something like blocked funds to the mix can make it even more complicated when you consider logistics of getting the supply chains, spare parts, the cost of fuel, airport charges and so on. So, the last thing you need as an airline is getting your money trapped in a particular country.”

More airlines will restart their operations to the African country now that the bulk of the blocked funds has been released, he said.

Emirates last month said it would resume flights to Nigeria in October after a nearly two-year suspension, during which the airline was in discussions with government authorities to repatriate its outstanding ticket sales revenue withheld in the country.

The top countries with blocked funds in the Africa and Middle East region are Algeria ($268 million), Ethiopia ($148 million), Lebanon ($129 million) and Eritrea ($75 million), according to Iata data.

Globally, eight countries account for 87 per cent of the total blocked funds, amounting to $1.6 billion.

These are Pakistan ($411 million), Bangladesh ($320 million) and Algeria ($286 million) at the top three. They were followed by Ethiopia, Lebanon, Eritrea and Zimbabwe, according to Iata data.

“Pakistan and Bangladesh must release the $731 million in blocked funds immediately to ensure airlines can continue providing essential air connectivity,” Willie Walsh, the director general of Iata, said.

“In Bangladesh, the solution is in the hands of the Central Bank, which must prioritise aviation’s access to foreign exchange in line with international treaty obligations. The solution in Pakistan is finding efficient alternatives to the system of audit and tax exemption certificates, which cause long processing delays.”

Pakistan has been seeking to boost economic growth to avoid a debt default and has been undertaking reforms to receive international aid.

In April, the International Monetary Fund's executive board authorised $1.1 billion in funding for the country, the final portion of a $3 billion arrangement Islamabad made with the multilateral lender last year.

To help secure the deal, Pakistan agreed to raise taxes and increase interest rates to tackle inflation.

Last month, the UAE also pledged $10 billion to invest in promising economic sectors in Pakistan during a visit by Pakistan's Prime Minister Shehbaz Sharif to Abu Dhabi.

Updated: June 04, 2024, 1:08 PM