Istanbul: Global aviation industry’s blocked funds have increased by 47% to $2.27bn in April this year from $1.55bn in April 2022, International Air Transport Association (IATA) announced here Sunday.
IATA, which is holding its three-day Annual General Meeting here, warned that rapidly rising levels of blocked funds are a threat to airline connectivity in the affected markets.
The top five countries account for 68% of blocked funds. These countries are; Nigeria ($812.2mn), Bangladesh ($214.1mn), Algeria ($196.3mn), Pakistan ($188.2mn) and Lebanon ($141.2mn).
IATA director general Willie Walsh said: “Airlines cannot continue to offer services in markets where they are unable to repatriate the revenues arising from their commercial activities in those markets. Governments need to work with industry to resolve this situation so airlines can continue to provide the connectivity that is vital to driving economic activity and job creation.”
IATA, the global body of more than 300 member airlines, urged governments to abide by international agreements and treaty obligations to enable airlines to repatriate these funds arising from the sale of tickets, cargo space, and other activities.
Airlines incur unnecessary costs when they are unable to repatriate their overseas sales funds, freely or in a time-bound manner, industry analysts say.
Typically, such costs occur when airlines' funds are forced to sit idle in foreign bank accounts as a result of foreign exchange shortages or regulatory obstacles put in place by certain governments.
By blocking airline funds from ticket sales, various countries are depriving the aviation industry of the much-needed cash, in contravention of bilateral agreements and global standards.
Holding back money belonging to airlines also discourages other carriers from serving the particular market, thereby reducing connectivity and options for passengers.
For airlines, this can lead to cash flow problems, reduced profitability, operational difficulties, reduced investment and reputation damage.
Blocked funds can cause significant cash flow problems for airlines, as they may not be able to access funds that are owed to them. This can impact their ability to pay for fuel, salaries, and other essential expenses, which could ultimately lead to financial difficulties and even bankruptcy.
When funds are blocked, airlines may have to accept lower profits or even losses on their international routes. This is because they may be forced to sell tickets in local currency and then hold onto that currency until they can access it, which can result in exchange rate losses.
These can also make it difficult for airlines to operate effectively. For example, they may be unable to pay their suppliers or service providers, which could impact their ability to maintain their aircraft, provide in-flight services, or even pay for landing fees and other airport charges.
Trapped funds can discourage airlines from investing in new routes or expanding their operations in certain countries. This can limit the growth potential of airlines and may lead to missed business opportunities.