The International Air Transport Association is finally making headway
in resolving the issue of blocked funds, which has left airlines flying
into certain African countries owed millions of dollars.
in resolving the issue of blocked funds, which has left airlines flying
into certain African countries owed millions of dollars.
Wind the
clock back to late 2017 and governments across Africa had blocked
nearly $1 billion in payments due to global carriers. The likes of
Nigeria, Sudan, Angola and Mozambique were amongst the worst offenders,
their economies hard hit by the slump in the price of oil and other
commodities.
clock back to late 2017 and governments across Africa had blocked
nearly $1 billion in payments due to global carriers. The likes of
Nigeria, Sudan, Angola and Mozambique were amongst the worst offenders,
their economies hard hit by the slump in the price of oil and other
commodities.
“These countries were overly dependent on natural
resources for a substantial portion of their revenue, and they were
dependent on imported products to sustain their own economies,” said
Raphael Kuuchi, IATA
vice president for Africa. “For many countries the question was: Do I
import food for my citizens, or do I give my money to airlines?”
resources for a substantial portion of their revenue, and they were
dependent on imported products to sustain their own economies,” said
Raphael Kuuchi, IATA
vice president for Africa. “For many countries the question was: Do I
import food for my citizens, or do I give my money to airlines?”
But
progress is being made. Both Nigeria and Egypt have cleared all blocked
funds, while Angola has reduced the amount it owes to airlines to
around $250 million, from $580 million.
progress is being made. Both Nigeria and Egypt have cleared all blocked
funds, while Angola has reduced the amount it owes to airlines to
around $250 million, from $580 million.
“There is definitely still
a lot of work to be done. During my last visit to Angola, I received
assurance that the government was going to clear the remainder of the
blocked funds by the end of August,” said Kuuchi. “From just under $1
billion, today we stand at around $500 million in funds blocked across
Africa.”
a lot of work to be done. During my last visit to Angola, I received
assurance that the government was going to clear the remainder of the
blocked funds by the end of August,” said Kuuchi. “From just under $1
billion, today we stand at around $500 million in funds blocked across
Africa.”
That includes $180 million still locked up in Sudan, $100
million in Zimbabwe, $40 million each for Algeria and Ethiopia, $29
million in Libya, and $11 million in both Mozambique and the Central
African Republic.
million in Zimbabwe, $40 million each for Algeria and Ethiopia, $29
million in Libya, and $11 million in both Mozambique and the Central
African Republic.
While the airline association wouldn’t provide
precise figures of how much was owed to specific airlines, funds are
typically withheld or released in proportion to the frequency and
capacity of flights into the country. With multiple daily frequencies to
Harare and Victoria Falls, cash-strapped South African Airways is said
to be owed some $60 million by Zimbabwe, while London-listed Fastjet is
due around $1.75 million.
precise figures of how much was owed to specific airlines, funds are
typically withheld or released in proportion to the frequency and
capacity of flights into the country. With multiple daily frequencies to
Harare and Victoria Falls, cash-strapped South African Airways is said
to be owed some $60 million by Zimbabwe, while London-listed Fastjet is
due around $1.75 million.
Without the cash to fund day-to-day
operations, “those airlines which are operating on small margins with
cash-flow constraints are most affected,” said Chris Zweigenthal, CEO of
the Airlines Association of Southern Africa.
“We have supported IATA’s work in [unblocking funds]… It is important
that a coordinated effort is undertaken to ensure there are no mixed
messages to governments.”
operations, “those airlines which are operating on small margins with
cash-flow constraints are most affected,” said Chris Zweigenthal, CEO of
the Airlines Association of Southern Africa.
“We have supported IATA’s work in [unblocking funds]… It is important
that a coordinated effort is undertaken to ensure there are no mixed
messages to governments.”
The progress thus far is thanks to a number of factors.
Along
with a rise in commodity prices improving foreign exchange earnings for
countries, carriers have used the ‘stick’ of reduced capacity and
frequencies to spur action.
with a rise in commodity prices improving foreign exchange earnings for
countries, carriers have used the ‘stick’ of reduced capacity and
frequencies to spur action.
“Some airlines have gone ahead and cut
back, because they could not continue to sustain operations without
getting funds out of the country. But governments are now realizing that
air transport is critical to their economies,” said Kuuchi.
back, because they could not continue to sustain operations without
getting funds out of the country. But governments are now realizing that
air transport is critical to their economies,” said Kuuchi.
Education
and diplomacy have also been part of the solution, with IATA
highlighting that withholding funds doesn’t only affect foreign
carriers.
and diplomacy have also been part of the solution, with IATA
highlighting that withholding funds doesn’t only affect foreign
carriers.
“We had to point out that even their own airlines flying
into foreign airports incur costs in foreign currency,” said Kuuchi.
“If they have to maintain aircraft outside their country, they need
foreign currency. If they need spare parts, they need foreign currency.”
into foreign airports incur costs in foreign currency,” said Kuuchi.
“If they have to maintain aircraft outside their country, they need
foreign currency. If they need spare parts, they need foreign currency.”
While
significant progress has been made, what will happen if – or should
that be when – the oil price drops? Will the currency taps be turned off
again?
significant progress has been made, what will happen if – or should
that be when – the oil price drops? Will the currency taps be turned off
again?
“That is absolutely a consideration,” admitted Kuuchi.
“But with countries like Nigeria and Egypt, where blocked funds have
been cleared, we have put measures in place with the central bank and
government to ensure consistent payment of funds to the airline sector
in the future.”
“But with countries like Nigeria and Egypt, where blocked funds have
been cleared, we have put measures in place with the central bank and
government to ensure consistent payment of funds to the airline sector
in the future.”
It’s by no means solely an issue for Africa,
though. According to IATA, airline funds remain blocked in 16 countries
around the world. That includes Venezuela, which has blocked nearly
$3.78 billion, while Bangladesh is holding onto $95 million owed to
airlines.
though. According to IATA, airline funds remain blocked in 16 countries
around the world. That includes Venezuela, which has blocked nearly
$3.78 billion, while Bangladesh is holding onto $95 million owed to
airlines.
The issue was also highlighted at IATA’s Annual General Meeting held in Sydney in June.
“The
connectivity provided by aviation is vital to economic growth and
development,” said Alexandre de Juniac, IATA’s Director General and CEO.
“But airlines need to have confidence that they will be able to
repatriate their revenues in order to bring these benefits to markets.”
connectivity provided by aviation is vital to economic growth and
development,” said Alexandre de Juniac, IATA’s Director General and CEO.
“But airlines need to have confidence that they will be able to
repatriate their revenues in order to bring these benefits to markets.”
