Airlines are owed $2 billion from the governments of more than 27 countries and territories that are seeking to retain hard currency, depriving the aviation industry of a revenue source as it tries to recoup losses incurred during the pandemic.
The amount of airline revenue prevented by governments from repatriation has risen by more than 25 per cent (or $394 million) in the past six months, the International Air Transport Association said on Thursday.
The top five markets where airlines' revenue remains stuck are Nigeria with $551 million, Pakistan with $225 million, Bangladesh with $208 million, Lebanon with $144 million and Algeria with $140 million, the latest report from Iata showed.
“Blocked funds continue to be a major area of concern for the industry. We are seeing in a number of countries that the level of funds is rising again,” Willie Walsh, director general of Iata, said at a media roundtable in Geneva.
“It was disappointing because we were seeing some progress that seems to have reversed in recent weeks and it is something that we will be raising awareness of.”
Blocked remittances have plagued airlines for years, but the situation has been exacerbated by the pandemic, which left airlines strapped for cash after nearly three years of weak travel demand.
In 2022, net losses of airlines are expected to reach $6.9 billion, an improvement on the $9.7 billion loss for the year in Iata's June outlook, the industry body said in its latest forecast this week.
This is significantly smaller than losses of $42 billion and $137.7 billion that were recorded in 2021 and in 2020, respectively.
IATA will continue to lobby on behalf of the airline industry with the relevant governments but individual airlines will make their own decisions about continuing service to those countries, Mr Walsh said.
“What's very clear in the case of countries where there is a high level of withheld funds is that the services to those countries reduce significantly,” he added.
“I don't think you can expect an airline to continue to serve a market if it is not paid.”
The top five markets blocking airline payments exclude Venezuela, which since 2016 has accrued unrepatriated airline revenue of $3.8 billion, IATA reported.
“Venezuela is the single biggest area and has been outstanding for some time, but the international services to Venezuela [have] shrunk to practically nothing, so it is a major concern for us,” Mr Walsh said.
Iata urged governments to remove all barriers to airlines repatriating their revenue from ticket sales and other activities, in line with international agreements and treaty obligations.
“Clearly it's in our interest, given the financial position of our member airlines, to ensure that they can repatriate their money as is expected under bilateral agreements that exist in many cases,” Mr Walsh said.
“The situation had been improving but has started to deteriorate again.”
Air connectivity to Venezuela has dwindled to a handful of airlines selling tickets primarily outside the country. Between 2016 and 2019, flights to and from Venezuela plummeted by 62 per cent, Iata said.
Venezuela is now looking to bolster tourism as part of its Covid-19 economic recovery plan and is petitioning airlines to restart or expand air services to and from the country.
“Success will be much more likely if Venezuela is able to instil confidence in the market by expeditiously settling past debts and providing concrete assurances that airlines will not face any blockages to future repatriation of funds,” IATA said.
Nigeria's airline repatriation issues began in March 2020, when demand for foreign currency in the country outpaced supply and its banks were not able to service currency repatriations.
However, Nigerian authorities have been engaged with airlines and are, together with the industry, working to find measures to release the funds available, Iata said.
“Working with the Nigerian House of Representatives, Central Bank and the Minister of Aviation resulted in the release of $120 million for repatriation with the promise of a further release at the end of 2022,” said Kamil Al Awadhi, Iata's regional vice president for Africa and the Middle East.
Dubai's Emirates airline resumed flights to Lagos in September after Nigeria's central bank released a portion of the funds owed to the world's biggest long-haul airline.
Emirates did not provide details on the size of the funds released or the amount that remains blocked.
Iata said that preventing airlines from repatriating funds may appear to be an “easy way to shore up depleted treasuries”, but ultimately, the local economy will pay a high price when it loses air connectivity because airlines are not getting paid.
Source: The National
Image: Getty Images
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