The International Air Transport Association (IATA) has sent a warning to the Central Bank of Nigeria that some foreign airlines may be forced to quit the Nigerian markets if nothing is done about the $790m ticket revenue currently trapped in the country.
Mr. Kamil Alawadhi who is the IATA Regional Vice President, Africa & Middle East while speaking at a media presentation with African journalists at the IATA Global Media Day in Geneva, Switzerland, on Thursday also said Lagos and Abuja airports had been ranked the most expensive gateways in the region despite the poor state of their infrastructure.
According to him, the Nigerian government is currently holding the highest amount of airline-trapped funds.
While commenting on blocked funds, the IATA VP listed Nigeria as the country with the highest amount of airlines’ blocked funds at $792m followed by Egypt ($348m); Algeria ($199m); AFI zone ($183m) and Ethiopia $128mn.
While Ethiopia has mapped out a strategy to defray the debt, he said that Nigeria had yet to do anything on its own.
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Al-Awadhi said, ‘Ethiopia is seeking a way to resolve this issue even though the blocked fund is rising. The first step for us to solve these blocked funds is for both parties to engage. If parties don’t engage, it is very difficult to move forward. I have not been able to engage with Nigeria’s CBN Governor. He said he would engage with me when he had a solution. He is not promising but I have engaged with the Aviation Minister who is very understanding, new to the position, or maybe wowed by the situation he inherited will help to resolve the matter.’
‘The airlines in Africa are owed $34 million. That $34 million is blocked. Depreciation has set in on the money. They have already lost $10 million because of depreciation. That is not fair for the airlines because they have paid all the dues to the operators of the airports. Every due has been paid for. They carry Nigerian officials on these flights and they can’t get their money.’
On the state of aviation in Nigeria, the IATA boos said with 25 per cent interest on loans, high airport taxes and insurance premiums which it said was six times more than anywhere in the world, it would be difficult for Nigerian airlines to make profit.
According to Al-Awadhi, any airline in Nigeria operating outside of Nigeria has a cheaper operating cost and better prices than Nigerian airlines.
He said, ‘Every airline has its challenges and it depends on where it operates. To answer this question, I will use Nigeria as an example. 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 profit.
He added, ‘IATA is identifying why these costs are high and we are trying to tackle them one by one by seeing how they can reduce the costs. We are expecting that the operating costs of the African airlines will be lowered and they can become profitable’, said Al-Awadhi.
IATA is identifying why these costs are high and we are trying to tackle them one by one by seeing how they can reduce the costs, hoping that the operating costs of the African airlines will be lowered and they can become profitable.’