Eritrea’s inability to issue foreign currency has led to the blockage of $73 million belonging to four airlines who commute to Asmara, the Eritrean capital. The affected airlines are Egypt Air, Turkish Airlines, Fly Dubai, and Ethiopian Airlines. These airlines cannot remit ticket sales to their home bases, because of foreign currency shortages at the Eritrean central bank.
The Horn of Africa nation is just one of five countries jointly blocking $413 million in airline funds. Zimbabwe is the biggest blocker at $192 million, followed by Sudan and Algeria with $84 and $80 million respectively. Angola is holding on to $7 million.
This is a global problem, but more African countries are taking turns blocking funds. Angola, for instance, owed more than $620 million last year. Egypt and Nigeria also had to be lobbied to release airline funds, about $251 million in the latter’s case. According to Muhammad Ali Albakri, IATA’s regional vice president for Africa and the Middle East, “We put out the fire in some places and it flares up in another place. It seems a never-ending issue.
The importance of these funds cannot be overemphasized. Cash flow is a lifeline to the airlines. If these problems persist airline will reduce their flight frequencies to these countries and may even pull out. This would eventually impact air connectivity in Africa.”
Since last year, industry players have been alarmed by the rise in blocked currency funds to nearly $700 million. At the opening of the 50th African Airlines Association (AFRAA) AGM in Rabat, Morocco, IATA DG Alexandre de Juniac said, “This is a big concern for us. Many of these countries are facing severe economic challenges. But blocking airline funds puts air connectivity at risk. That, in fact, deepens economic challenges.”
According to Juniac, African governments do not treat aviation with the seriousness it deserves. “Taxes and fees are amongst the highest in the world,” he said. “African governments view aviation as a luxury rather than a necessity. We must change this perception.”
It remains a head-scratcher why these nations’ first call is to block funds. “Angola and other countries blocking funds are undergoing significant economic challenges. But blocking airlines’ funds is not the answer. It is in everybody’s interest to ensure that airlines are paid on time, at fair exchange rates and in full,” Juniac said in August 2018.
IATA former DG and CEO Tony Tyler said in 2016, “The airline industry is a competitive business operating on thin margins. So, the efficient repatriation of revenues is critical for airlines to be able to play their role as a catalyst for economic activity. It is not reasonable to expect airlines to invest and operate in nations where they cannot efficiently collect payment for their services.”
While some countries are rooted in diplomatic stalemates and internal conflicts, others simply do not take this problem seriously. Airlines are businesses, and profit is a big deal. If these problems persist, Qatar Airways and Lufthansa might not be the last airlines to stop flying to Asmara and other major African capitals.
By Caleb Ajinomoh