More than $1.4bn airline funds blocked in Africa

Dublin - The blocking of funds is becoming an increasing problem for airlines dealing with certain African countries, Tony Tyler, CEO of the International Air Transport Association (Iata) said on Thursday.

It is estimated that the total amount of airline funds being blocked in Nigeria, Angola, Egypt and Sudan so far is over $1.4bn.

"It is especially oil based economies in Africa where problems are created for airlines regarding the remittance of their revenues," Tyler said during a press conference at Iata's 72nd annual general meeting.

For instance, it is estimated that so far Nigeria has blocked about $600m in airlines' funds. Tyler himself has even visited Nigeria to try and find a solution.

"It is important that airlines are allowed to remit their revenues, otherwise they have to stop flying to these destinations, because they cannot get their money out to pay for operations," explained Tyler.

He emphasised that, if a government do not allow an airline to operate, it will have dire economic consequences for that country - much greater than the withholding of funds.

Other African countries where the same problem of blocking of airline funds has arisen, are Angola, Sudan and Egypt. In Egypt is has been mainly due to the slump in the tourism industry, while the drop in the oil price affected the other three countries. This raises the question of what impact it could have on South African Airways (SAA), which operates flights to some of these destinations.

Dr Elijah Chingosho, secretary general of the African Airlines Association (Afraa) told Fin24 that Afraa has been lobbying the African governments involved in blocking of funds to give air transport priority in the allocation of foreign exchange. This is because of the importance of air transport connectivity for the economies of these states.

For example, air transport carry international tourists bringing foreign currency and air transport will carry exports which will earn foreign currency.

"Afraa is teaming up with Iata to reinforce the message and lobby states to look for alternative solutions to blocking airline funds. We are urging the affected states to accept payments in local currencies for some aviation services, for example ground handling, fuel and catering," said Chingosho.

"The consequences of states blocking funds would be a negative impact on their cash flows and options for airlines would then be to cut their losses by scaling down operations until the situation improves."

Other major issues in African aviation at the moment, according to Chingosho, include aviation safety as the most important in his view. He is happy, though with more and more airlines on the continent adhering to Iata's Operational Safety Audit (IOSA).

Another major priority for the aviation industry in Africa, is ensuring the attainment of open skies on the continent. Talk of this has been ongoing for many years already.

"It is very critical for African aviation to facilitate consolidation of the industry to allow airlines to cross invest into each other. This lack of open skies on the continent is a major constraint for the development of viable African carriers," he explained.

Another major factor that needs attention is the need to reduce the very high industry costs.

"Even though we witnessed global fuel prices dropping, the price of jet fuel has hardly dropped in Africa and this puts African airlines at a competitive disadvantage," said Chingosho.

He pointed out that non-African airlines account for over 80% of market share of inter-continental air traffic to and from Africa. Africa's charges for air passengers are also among the highest in the world - averaging from $40 to $140 in some locations compared to the global average of about $25 per passenger.

"Therefore, high fuel and passenger charges mean airfares for routes in Africa tend to be very high, which puts air travel beyond the means of the majority of people," said Chingosho.

"Yet, air travel is supposed to be a means of mass transport, especially in many African states where roads and rail are poor or non-existent. Governments need to get away from thinking that air transport is only a means of transport for the wealthy."