The International Air Transport Association (IATA) has called on governments to begin repatriating blocked airline funds following a 25% increase since June. The combined total owed currently sits at almost $2 billion, divided across 27 countries.
$1.2 billion trapped in five nations
In a statement released on Wednesday, the IATA warned about the skyrocketing amount of trapped funds as governments attempt to pad the impact of currency crises. Across the past six months, the figure has increased by almost $400 million to $2 billion, with over 60% of the blocked amount attributed to just five countries: Nigeria, Pakistan, Bangladesh, Lebanon, and Algeria.
IATA Director General Willie Walsh cautioned the nations with outstanding debts to airlines, citing compliance with respective international agreements and obligations.
“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 chain.”
Currency crises
Nigeria is the highest debtor named by the IATA, with coverage of the crisis seeing significant coverage through summer and autumn. The debt notably became the subject of an ongoing feud between the government and Dubai-based Emirates. Last month, the airline withdrew from operations in the West African nation after continued delays in repatriating its revenue.
In September, Nigeria announced it would begin fining carriers that did not sell tickets in naira amid its ongoing international currency crisis, inflating total blocked funds to almost $700 million in late October. Although $551 million is still pending repatriation, Kamil Al-Awadhi, IATA Regional Vice President for Africa and the Middle East, praised the country’s collaborative and constructive work to begin resolving the issue despite difficult circumstances and release $120 million in November. A further release is expected by the end of the year.
Pakistan trailed behind Nigeria, with $225 million owed. While no formal currency crisis has been declared, economists at Bloomberg have warned of a sharp increase in its probability through 2023 after the country sought to ease conditions for the $1.1 billion International Monetary Fund (IMF) loan provided in August.
Bangladesh, Lebanon, and Algeria round out the top five, owing $208 million, $133 million, and $140 million, respectively.
Returning to Venezuela
Outside of the $2 billion owed, the IATA has turned its eyes to Venezuela, which racked up $3.8 billion in airline debt during a prolonged period of hyperinflation, political instability, and international sanctions. The government has blocked the repatriation of airline funds since 2016, leading to international air traffic into Venezuela dropping by 62% between 2016 and 2019.
Since 2021, the country has made significant headway in bolstering its economy, recording 17.04% year-on-year economic growth during the first financial quarter of 2022. Several carriers, including TAP Air Portugal, LATAM, and Avianca, have already resumed flights to Venezuela as the country moves to promote its tourism market.
While several governments remain unconvinced of the country’s stability and continue to advise against travel, Venezuela has notably seen an uptick in arrivals from Russian holidaymakers seeking “friendly” destinations. Nordwind Airlines relaunched direct services between Moscow Sheremetyevo (SVO) and Margarita (PMV) on October 2, welcoming 3,000 tourists to the resort island during October and November. A recently assigned agreement between both countries could see a potential 100,000 Russian holidaymakers visit the country before the end of the year.
Source: Simple Flying
