• Stood at $1.8 billion in April 2024

• Nigeria clears 98% of previously blocked funds

• Emirates will finally resume flights to Nigeria

Business a.m. with wire report

Airline funds trapped globally have been cut by 28 percent in the last six months with the progress being driven mainly by Nigeria clearing a good chunk of what it is owing, per report by Simple Flying.

Referencing an International Air Transport Association (IATA) update report, it noted that  airline funds trapped by governments worldwide stood at approximately $1.8 billion at the end of April 2024, a 28 percent reduction from December 2023, noting that governments across the world have managed to clear about $708 million over the past six months, showing a positive development for the airline industry.

IATA reported that Nigeria has made great progress since June 2023 by clearing about 98 percent of blocked funds. Per Simple Flying this has been one of the biggest challenges and a significant threat to connectivity in the West African country. While progress has been made globally, the remaining $1.8 billion is a substantial amount that still needs to be addressed.

Willie Walsh, IATA director general, said:

“The reduction in blocked funds is a positive development. The remaining $1.8 billion, however, is significant and must be urgently addressed. The efficient repatriation of airline revenues is guaranteed in bilateral agreements. Even more importantly, it is a prerequisite for airlines — who operate on thin margins — to be able to provide economically critical connectivity. No business can operate long-term without access to rightfully earned revenues.”

The association continues to call for governments to remove all barriers to airlines repatriating their revenues from ticket sales and other activities in accordance with international agreements and treaties. In addition to Nigeria, Egypt also cleared a significant amount of blocked funds. However, in both countries, airlines were affected by the devaluation of the Nigerian Naira and the Egyptian Pound.

Nigeria clears 98% trapped funds

Nigeria topped the list of countries with the most blocked funds for several months. The amount peaked at $850 million in June 2023, significantly affecting airline operations and finances in the country. However, IATA reports that 98 percent of these funds have been cleared as of April 2024. Only about $19 million remains to be cleared due to the Central Bank’s ongoing verification of outstanding forward claims filed by the commercial banks.

Airlines operating flights in the West African country faced difficulties in repatriating revenues in US dollars, leading some to reduce services or suspend operations. In October 2022, Emirates, one of the leading international carriers in Nigeria, suspended all operations after failing to find solutions to repatriate trapped funds.

However, Nigeria’s new government has made significant progress in resolving the issue. Last year, the president’s special advisor announced that Emirates would resume flights to Nigeria, while the UAE lifted the visa ban on Nigerian nationals. While the situation remained unchanged for the following months, Emirates finally announced the resumption of flights from Dubai to Lagos in May 2024. Speaking about the development in Nigeria, Willie Walsh said:

“We commend the new Nigerian government and the Central Bank of Nigeria for their efforts to resolve this issue. Individual Nigerians and the economy will all benefit from reliable air connectivity for which access to revenues is critical. We are on the right path and urge the government to clear the residual $19 million and continue prioritising aviation.”

The progress in Nigeria is also a positive development for the African continent, which had 75 percent of the world’s blocked funds in October 2023. According to IATA, eight countries are currently responsible for 87 percent of the total blocked funds, amounting to $1.6 billion. These include:

African airlines profitability

On June 3, IATA announced strengthened profitability projections for airlines in 2024 compared to its June and December 2023 forecasts. Net profits are expected to reach $30.5 billion (3.1% net profit margin) this year, an improvement on 2023 net profits (3.0% net profit margin), estimated to be $27.4 billion. It has also improved from the $25.7 billion (2.7% net profit margin) forecasted for 2024 in December 2023.

In Africa, airlines are expected to post a combined net profit of $0.1 billion, with a 0.6% profit margin and a $0.9 profit margin per passenger carried in 2024. African airlines continue to face high operational costs, while the continent has a low propensity to spend on air travel. Furthermore, the lack of connectivity and several other challenges stifle the industry’s expansion. Despite the challenges, demand for air travel has grown by 8.5%, allowing for a second year of profitability.