Nigeria ranks top in cost of operating airlines in Africa, says IATA

Business a.m

The International Air Transport Association (IATA) has revealed that international airlines in Nigeria are still facing difficulties in accessing their trapped funds in the country, estimated to be around $720 million, while the cost of operating airlines in Africa’s largest economy remains one of the most expensive in the continent. 

Kamil Al Awadhi, the regional vice president for Africa and the Middle East at the International Air Transport Association (IATA), made the disclosure in an interview with CNBC Africa. In the interview, he clarified that media reports suggesting that international airlines in Nigeria had recovered their trapped funds were inaccurate. He went on to explain that the trapped funds issue was a significant burden for the airlines, as it led to increased costs and reduced competitiveness. 

Al Awadhi further confirmed that the Central Bank of Nigeria (CBN) has only repatriated about $65 million of the funds owed to airlines, which is a fraction of the total amount of blocked funds. He noted that the current administration, however, has been more open to dialogue with the airlines and has been working towards resolving the issue.

Asked about the high cost of air tickets in Nigeria and whether the airlines were profiting from the high prices, he responded that the airlines were not generating a profit in Nigeria, and in fact, they were losing money. 

The IATA regional vice president  noted that this was due to the many challenges facing the aviation industry in Nigeria, including the issue of trapped funds. He also pointed out that if the operating environment in Nigeria improves, the costs will go down and the airlines will be able to generate more revenue. 

In his words, “You have to remember the cost of operating is one of the most expensive in all of Africa, the charges are definitely going to be more expensive.

“You also have to take into consideration the blocked funds and the fair value of the blocked funds. If you have $720 million blocked and then you devalue the naira by 30%, you have wiped out over $200 million of airlines’ money, and they have to compensate that.”

Prior to the statement by the IATA’s regional vice president, the organisation had been voicing concerns about the excessive charges and taxes imposed on airlines operating in Nigeria. In September 2023, IATA called out the Nigerian government for hindering the growth and profitability of indigenous carriers through these excessive fees and taxes.

The results of a recent IATA study on airport charges in Africa was shared at the 7th Aviation Africa summit and exhibition in Abuja. The study found that Nigeria ranked highest in airport charges on the continent, with Abuja airport being the most expensive airport in Africa, followed by Lagos airport.

Dwelling on this,Al Alwadhi lamented the lack of growth in the aviation industry in Nigeria, despite its enormous potential. He urged the Nigerian government to create an environment that is conducive for airlines to thrive.