IATA: Nigeria clearance leaves Pakistan and Bangladesh as largest holders of blocked airline funds
The International Air Transport Association (IATA) has reported a 28% decrease in the amount of airline funds blocked from repatriation by governments. The total blocked funds at the end of Apr-2024 stood at approximately USD1.8 billion, a reduction of USD708 million (28%) since Dec-2023.
The airline trade body has reiterated the call for governments to remove all barriers to airlines repatriating their revenues from ticket sales and other activities in accordance with international agreements and treaty obligations.
- IATA reports a 28% decrease in the amount of airline funds blocked from repatriation by governments.
- Total blocked funds at the end of Apr-2024 stood at approximately USD1.8 billion.
- A ‘positive movement’ but still a ‘significant’ issue that needs to be ‘urgently addressed’.
- Nigeria clears almost all blocked funds – at peak in Jun-2023 this stood at USD850 million.
- Just eight countries are now responsible for 87% of blocked funds.
- Pakistan and Bangladesh now largest holders of blocked airline revenues.
- Algeria, Ethiopia, Lebanon, Eritrea and Zimbabwe also among largest holders of funds.
A 'positive movement' but still a 'significant' issue that needs to be 'urgently addressed'
The reduction in blocked funds "is a positive development," says Willie Walsh, IATA's Director General, but it still leaves USD1.8 billion, an issue that is "significant and must be urgently addressed".
The efficient repatriation of airline revenues is guaranteed in bilateral agreements and is a pre-requisite for airlines to be able to provide economically critical connectivity.
"No business can operate long-term without access to rightfully earned revenues," notes Mr Walsh.
The main driver of the reduction was a significant clearance of funds blocked in Nigeria. Egypt also approved the clearance of its significant accumulation of blocked funds.
However, IATA notes that in both cases, airlines were adversely affected by the devaluation of the Egyptian Pound and the Nigerian Naira.
Nigeria clears almost all blocked funds
At its peak in Jun-2023, Nigeria's blocked funds amounted to USD850 million, significantly affecting airline operations and finances in the country.
Airlines faced difficulties in repatriating revenues in US dollars, and the high volume of blocked funds led some airlines to reduce their operations and one airline to temporarily cease operations to Nigeria, which severely impacted the country's aviation industry.
IATA notes that as of Apr-2024, 98% of these funds have now been cleared. The remaining outstanding USD19 million is due to the Central Bank's ongoing verification of outstanding forward claims filed by the commercial banks, it says.
IATA commends the new Nigerian government and the Central Bank of Nigeria for their efforts to resolve this issue, which will mean that "individual Nigerians and the economy will all benefit from reliable air connectivity for which access to revenues is critical," explains Mr Walsh.
"We are on the right path and urge the government to clear the residual USD19 million and continue prioritising aviation", he adds.
CAPA - Centre for Aviation and OAG data highlights that international capacity in the Nigerian market shows an inconsistent profile. It peaked at over six million seats in 2014 and 2015 before falling, almost hitting the six million figure again in 2018, before falling again, even before the COVID-19 pandemic.
It returned back above five million seats in 2022, rising a negligible 2.4% in 2023, but a strong 1Q2024 performance will likely see international capacity rise in 2024.
Nigeria: international seat capacity (2022 - 2024YTD)
As at the start of Jun-2024, Ethiopian Airlines is the largest foreign airline serving Nigeria, ahead of Qatar Airways, British Airways and Turkish Airlines. Although local airline Air Peace is the largest international operator out of Nigeria, foreign airlines account for 85.4% of the country's external connectivity.
Just eight countries are responsible for 87% of blocked funds
After the clearance of these highlighted blocked funds in Nigeria and Egypt, eight countries now account for 87% of the total blocked funds, amounting to USD1.6 billion of the USD1.8 billion total. Algeria, Ethiopia, Lebanon, Eritrea and Zimbabwe also make the list, with the latter two countries holding onto funds for the longest period.
Eight countries are responsible for 87% of blocked funds
| Country | Amount USD million | Months Held |
| Pakistan | 411 | 40 |
| Bangladesh | 320 | 40 |
| Algeria | 286 | 37 |
| XAF Zone | 151 | 50 |
| Ethiopia | 149 | 58 |
| Lebanon | 129 | 52 |
| Eritrea | 116 | 116 |
| Zimbabwe | 69 | 84 |
'Severe' blocked funds situation in Pakistan and Bangladesh
The situation has become "severe" in Pakistan and Bangladesh, says IATA, with airlines unable to repatriate USD731 million (USD411 million in Pakistan and USD320 million in Bangladesh) of revenues earned in these markets.
Mr Walsh says Pakistan and Bangladesh "must release" these blocked funds immediately to ensure that airlines can "continue providing essential air connectivity".
In Bangladesh the solution is in the hands of the Central Bank, which IATA says must "prioritise aviation's access to foreign exchange" in line with international treaty obligations. The solution in Pakistan, it says, is finding "efficient alternatives to the system of audit and tax exemption certificates", which are causing long processing delays.
According to CAPA - Centre for Aviation and OAG data for the first week of Jun-2024, foreign airlines account for a similar level of capacity out of Pakistan and Bangladesh - 60.1% and 60.2% of international capacity, respectively. The Middle East operators Emirates Airline, Qatar Airways, Air Arabia, Saudia and flydubai are the largest foreign operators in these markets.