- Foreign airlines operating in Nigeria are considering exiting the country over trapped revenue
- IATA disclosed this development as it urged the Nigerian government to expedite actions on the funds
- It added that the high operating cost in Nigeria makes it challenging for airlines to achieve profitability
Legit.ng journalist Victor Enengedi has over a decade's experience covering Energy, MSMEs, Technology and the stock market.
The Central Bank of Nigeria has been cautioned by the International Air Transport Association (IATA) regarding the potential departure of certain foreign airlines from the Nigerian markets.
This warning stems from the existing challenge of $792 million in ticket revenue currently inaccessible within the country.
Kamil Alawadhi, the IATA regional vice president for Africa & Middle East, conveyed this message during a media presentation held with African journalists at the IATA Global Media Day in Geneva, Switzerland.
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The global trade association for airlines had earlier called out Nigeria and other African nations for their reluctance to permit international airlines to repatriate their profits, amounting to an estimated $1.68 billion.
Nigeria is the biggest debtor
Alawadhi highlighted that despite the inadequate infrastructure, Lagos and Abuja airports have been identified as the most expensive gateways in the region.
According to Punch, he mentioned that presently, the Nigerian government holds the largest sum of airline-impounded funds.
Addressing the issue of blocked funds, the IATA vice president highlighted Nigeria as the nation with the highest amount of blocked funds from airlines, totalling $792 million.
Following Nigeria, other countries with substantial amounts include Egypt with $348 million, Algeria with $199 million, the AFI zone with $183 million, and Ethiopia with $128 million.
Alawadhi said Ethiopia has devised a plan to settle its debt, whereas Nigeria has not taken any step.
High cost of operations in Nigeria
Regarding the aviation landscape in Nigeria, the head of IATA expressed concern, citing challenges such as a 25% interest rate on loans, elevated airport taxes, and insurance premiums six times higher than the global average.
Amid foreign airlines seeking the repatriation of their trapped funds, a minimum of four local airlines possess funds surpassing $54 million currently held within the CBN.
Alawadhi emphasised that these factors collectively make it challenging for Nigerian airlines to achieve profitability.
He further noted that any airline operating outside of Nigeria incurs lower operating costs and offers more competitive prices compared to domestic Nigerian airlines.
"Nigeria has two most expensive airports; their fuel is higher than elsewhere in the world, and insurance is six times more expensive than anywhere else in the world. The interest on loans is 25%. It is ridiculous. It is the highest interest I have ever seen.
"When you set up these airlines, you are already disadvantaged. Any airline in Nigeria operating outside of Nigeria has a cheaper operating cost and better prices than Nigerian airlines. You can see why it is difficult for African airlines to make a profit."
He further stated that IATA is actively investigating the reasons behind the elevated operating costs and is taking a step-by-step approach to address each issue.
The organisation is focused on finding ways to reduce these costs with the ultimate goal of enhancing the profitability of airlines.
Repaying trapped funds will benefit Nigerians
Speaking on the continued delay in the repayment of foreign airlines, aviation expert, Engr. Tony Umeke, told Legit.ng that Nigerian air travellers will be before for it.
There are a lot of benefits for Nigeria if the Federal Government can repay at least half of the funds being owed to these foreign airlines. It would alleviate the strain within the sector and significantly contribute to reducing international airfares.
Umeke added that the issue has negatively rubbed off on the image of the country. He however advised the government to sit down with the airlines and negotiate a repayment plan.
Air Peace, other Nigerian airlines to begin US, UK flights
In related news, Legit.ng reported that some Nigerian airlines are now permitted to operate flights to the United Kingdom and Europe, thanks to the Third Country Operator (TCO) certificate the Nigerian Civil Aviation Authority (NCAA) granted them.
This certification streamlines the process for selected airlines planning to serve routes in the UK and various European nations, including Air Peace, Omni Blu Airline, United Nigeria Airlines, and others that recently acquired the TCO.
The TCO facilitates a smoother application process for these airlines to operate on designated routes without complications.