$600m Blocked Funds: Foreign Airlines May Cut Flights

Many foreign airlines are considering further drastic steps to mitigate the effects of blocked funds in Nigeria.

The options, according to a highly placed source, include outright stoppage of flights to Nigeria, reduction in frequencies which Emirates Airlines hinted about and further hike in ticket prices.

This was coming after Emirates in the United Arab Emirates (UAE) indicated in a July 22, letter to the Minister of Aviation, Senator Hadi Sirika, that it would reduce its flights from 11 per week to seven per week from August 15 over the blocked funds.

Emirates indicated in the letter which got leaked at the weekend that its $85m was trapped in Nigeria.

It has been gathered that the funds as at last week had accumulated to about $600m for all the foreign airlines; the same amount in dollars the President Muhammadu Buhari administration inherited and cleared in 2015.

Emirates stated that it had no choice “but to take this action to mitigate the continued losses Emirates is experiencing as a result of funds being blocked in Nigeria.”

The letter further reads: “We simply cannot continue to operate at the current level in the face of mounting losses, especially in the challenging post-COVID-19 climate.

“Emirates did try to stem the losses by proposing to pay for fuel in Nigeria in naira, which would have at least reduced one element of our ongoing costs. However, this request was denied by the supplier. This means that not only are Emirates’ revenues accumulating, we also have to send hard currency into Nigeria to sustain our own operations. Meanwhile our revenues are out of reach and not even earning credit interest.”

Emirates later said in a statement at the weekend that it was “making every effort to find a solution to this issue through constructive and substantive dialogue with limited success, and welcome any support from the Nigerian government so we can move towards a positive outcome to avoid a reduction in our operations.”

Our correspondent learnt that other airlines like British Airways, Delta and Qatar are considering available options to mitigate the effects of the blocked funds.

A source said, “The truth is we will continue to buy expensive tickets on foreign airlines as the funds accumulate. Some airlines have been selling tickets at expensive rates enough to buy dollars at the parallel market so they can have something to repatriate.”

The President of the Association of Foreign Airlines and Representatives in Nigeria (AFARN), Kingsley Nwokoma, said, “If the foreign airlines continue to operate, it means the money will keep skyrocketing and government has not found solutions to it. And because of the Bilateral Air Service Agreement (BASA), the airlines can’t sell tickets in dollars.

“If all countries are not repatriating their money, it means the airlines will shut down.”

The implication of the possible shutdown, he said, would be felt in the economy as passengers would have to go to neighbouring countries like Ghana and Benin Republic to board international flights.

Speaking on the sidelines of the League of Airport and Aviation Correspondents (LAAC) conference, Group Managing Director of Finchglow Holdings, Mr Bankole Bernard, said government should have addressed the issue by now.

He said, “I think it is an issue that is over flogged. I don’t think at this particular point in time we should still be talking about things like this; we need to go back to the drawing board and address this thing the way we had addressed it in the past.

“Remember two years ago, we had this kind of issue that even the funds got to an amount far higher than what it is now about $750m and here we are talking about $450m that has been stocked as a result of CBN not providing funds. I think we need to give priority and I think with the sort of service that these foreign airlines have brought to us, I think CBN should have given them priority in being able to repatriate their money. I honestly don’t understand what is happening at CBN, but it really requires a lot of intervention; the government needs to address the issue.”