Concern as blocked funds rise for airlines; total funds blocked tally close to $2bn

For many countries, one easy way to shore up depleted treasuries seems to be preventing foreign airlines from repatriating funds.
In the last six months, the amount of airline funds for repatriation being blocked by governments has risen by more than 25% to $394mn. Total funds blocked now tally at close to $2bn, according to the International Air Transport Association (IATA).
Airline funds are being blocked from repatriation in as many as 27 countries and territories. Last year, some 20 countries owed $1bn to airlines worldwide.
Venezuela topped the list with $3.8bn of blocked airline funds since 2016. IATA has urged the Venezuelan government to settle the airline funds that have been blocked from repatriation since 2016 when the last authorisation for limited repatriation of funds was allowed by it.
The other top markets with blocked funds are: Nigeria: $551mn, Pakistan: $225mn, Bangladesh: $208mn, Lebanon: $144mn, and Algeria: $140mn.
IATA’s Director General Willie Walsh said: “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.
“No business can sustain providing service if they cannot get paid and this is no different for airlines. Air links are a vital economic catalyst. Enabling the efficient repatriation of revenues is a critical for any economy to remain globally connected to markets and supply chains.”
The industry has to tackle the issue of blocked funds at a time when it is slowly recovering from one of the worst crisis hitting it in recent decades following the pandemic.
IATA expects net airline industry losses of $6.9bn in 2022. This is significantly better than losses of $42bn and $137.7bn that were realised in 2021 and 2020 respectively.
In 2023, airlines are expected to post a small net profit of $4.7bn — a 0.6% net profit margin. It is the first profit since 2019.
Passenger numbers could surpass the four billion mark for the first time since 2019, with 4.2bn travellers expected to fly. However, the Covid situation in China and many other countries remain a major concern.
Overall costs are expected to grow 5.3% to $776bn. That growth is expected to be 1.8 percentage points below revenue growth, thus supporting a return to profitability. Cost pressures are still there from labour and capacity shortages. Infrastructure costs are also a concern.
In terms of blocked funds in Nigeria, repatriation issues arose in March 2020 when demand for foreign currency in the country outpaced supply and the country’s banks were not able to service currency repatriations.
Despite these challenges, Nigerian authorities have been engaged with the airlines and are, together with the industry, working to find measures to release the funds available.
“Nigeria is an example of how government-industry engagement can resolve blocked funds issues. Working with the Nigerian House of Representatives, Central Bank and the Minister of Aviation resulted in the release of $120mn for repatriation with the promise of a further release at the end of 2022. This encouraging progress demonstrates that, even in difficult circumstances, solutions can be found to clear blocked funds and ensure vital connectivity,” said Kamil al-Awadhi, regional vice-president (Africa and the Middle East).
Airlines have also restarted efforts to recover the $3.8bn of unrepatriated airline revenues in Venezuela. There have been no approvals of repatriation of these airline funds since early 2016 and connectivity to Venezuela has dwindled to a handful of airlines selling tickets primarily outside the country.
In fact, between 2016 and 2019 (the last normal year before Covid-19) connectivity to/from Venezuela plummeted by 62%. Venezuela is now looking to bolster tourism as part of its Covid-19 economic recovery plan and is seeking airlines to restart or expand air services to and from Venezuela.
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.  

Pratap John is Business Editor at Gulf Times. Twitter handle: @PratapJohn