Friday, December 8, 2023
BusinessRepatriation woes leave African airlines discontented

Repatriation woes leave African airlines discontented

Forex crunch pushes 12 African countries, including Ethiopia, to withhold $1 billion

Leading African national airlines are unable to repatriate sales revenues, resulting in capital constraints.

About 12 African countries, including Ethiopia, are unable to pay airlines’ sales revenue, amounting to USD one billion.

The airlines owe blocked funds primarily to African countries that are experiencing foreign currency shortages.

Ethiopia is among the African nations that owe air carriers sales revenues in foreign currency.

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During the 11th African Airlines Association (AFRAA) stakeholders convention, which took place on May 8 and 9 in Addis Ababa at the Ethiopian Airlines Group-owned Skylight hotel, Dalmas Okendo, Kenya Airway’s head of regulatory affairs and investor relations, said that “some elephants are too big to ignore, and blocked funds are one of them.”

“We continue to increase our capacity and fly to more places. But how can we continue increasing our capacity when our money is not paid back? The money is stuck there. We could not bring the money back,” Okendo said.

Nigeria, Malawi, Ethiopia, Burundi, and Zambia are among the nations that have not paid the Kenyan airlines, according to Okendo.

In an interview with The Reporter, Raphael Kuuchi, director of government legal and industry affairs at AFRAA, stated that the issue of blocked funds has become a significant obstacle for African airlines. It is regrettable, he says, and that it has been so difficult for the countries to release this money.

“These countries have not enough foreign currency to ration it. When countries have a shortage of foreign currency, it is difficult for airlines to take out their money. Partly the blocked funds increased because countries do not prioritize the airlines payments,” Kuuchi said.

The majority of the blocked funds, which are sales revenues and operating expenses, are refunded by the destination country. Since airlines are not registered in the countries where their flights land, they cover the operational expenses from their headquarters, which are then reimbursed.

However, Africa is not the only region in which airline funds are restricted.

“Globally, USD 1.8 billion is the total amount of blocked funds. We have blocked funds in Lebanon, Brazil, and other countries,” said Kuuchi.

Particularly, Nigeria is the leader in terms of foreign airline debt, owing nearly half a billion dollars.

Ethiopian Airlines officials claim that Ethiopia’s share is insignificant.

“Ethiopian Airlines is Ethiopia’s dominant operator. So Ethiopia owes little to foreign airlines. But, it has unpaid revenues from other countries,” said an official at the Group, refraining from disclosing the figure.

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