Thursday, June 20, 2024
BusinessEthiopian Airlines' cash stuck in currency deadlock with Eritrea, Nigeria

Ethiopian Airlines’ cash stuck in currency deadlock with Eritrea, Nigeria

Ethiopian Airlines is struggling to repatriate funds from Eritrea and Nigeria due to currency issues. The airline currently has USD 2.5 million stuck in Eritrea and USD 80 million blocked in Nigeria. 

Ethiopian Airlines resumed operating flights to Eritrea four years ago following two decades of service interruption. This came after a rapprochement between the two countries following the appointment of Abiy Ahmed (PhD) as Ethiopia’s Prime Minister in April 2018.

The airline now operates two to three daily flights to Eritrea, but currency shortages have made it difficult to withdraw revenues from ticket sales.

In Eritrea, the government lacks enough foreign currency to pay Ethiopian Airlines,  according to Mesfin Tassew, Ethiopian Airlines CEO. “Since we cannot use Eritrean money in Ethiopia, they change it to dollars and give it to us. But Eritrea says they don’t have currency.”     

In Nigeria, the Airlines faces a similar problem. Nigeria has withheld USD 80 million owed to the airline for over a year. Nigeria is short on foreign currency, making it hard for Ethiopian Airlines to convert revenues into dollars.   

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Mesfin said Ethiopian Airlines has managed to retrieve some blocked funds through measures like dollar auctions. However, the airline will now ask the International Air Transport Association for help (IATA).

Nigeria has blocked USD 812 million in airline funds, the highest of any country, according to IATA data. IATA is concerned about rising blocked funds that constrain air connectivity.

IATA warned that rapidly rising levels of blocked funds are a threat to airline connectivity in the affected markets. The industry’s blocked funds have increased by 47 percent to USD 2.27 billion in April 2023 from USD 1.55 billion in April 2022.  

“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,” said Willie Walsh, IATA’s director general.

Ethiopian Airlines has flown to Nigeria since 1960 and currently serves four destinations there. But currency issues mean ticket revenues are increasingly out of reach for the African carrier.

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