The International Air Transport Association (IATA) reports progress in its efforts to convince African governments to release airline funds they have blocked due to a foreign currency crunch, but more work remains to ensure the situation does not result in a disruption of service.
Speaking with AIN about the state of the African airline industry, newly appointed IATA director general Alexander de Juniac said that IATA continues to work closely with the governments of Nigeria, Egypt, Angola and Sudan, the four countries that hold the majority of the blocked funds precipitated by a crash in commodity markets. He added that IATA and member airlines have managed to reduce the amount of blocked funds in Nigeria and Egypt.
“We are organizing a coordinated effort with member airlines,” said de Juniac. “[We took] a coordinated approach towards solving the problem and we were successful in Nigeria and Egypt. We cannot ban these countries. That is anti-competitive.”
De Juniac recalled the bad experience of Venezuela as a cautionary tale. “The government of Venezuela had refused to release airlines funds and look what happened there,” he said. “The airlines gave up and stopped flying to Venezuela. That is a disaster. But I am sure that is not going to happen in Africa...because we are working with African governments successfully.”
According to IATA, 18 African governments have yet to repatriate a total of $1.4 billion of blocked funds. Nigeria alone holds $339 million, while Egypt still holds $310 million, Sudan $250 million, Angola $190 million and Algeria $125 million.
Meanwhile, IATA projects that 2017 will mark yet another year of financial loss for African airlines. IATA’s recently released market forecast indicates that African airlines would lose $800 million next year. The revised figures also show that African carriers lost $900 million in 2015 and close to $800 million this year.
IATA chief economist Brian Pearce told AIN that the falling commodity prices—particularly that of oil—severely damaged African economies in 2015 and 2016. “The economies were weakened,” he said. Governments had cut back spending and this resulted in a downturn in air travel demand.”
Pearce said that resulting foreign exchange problems led to the challenge of repatriating funds. “But also the local airlines did not see the benefits of falling fuel prices because the dollar is more expensive,” he added. “It has been quite a challenging environment.”
Still, Pearce said the medium-term prospects for Africa remain positive. “I think it is encouraging that we have seen recently some recovery in commodity prices, particularly in oil price,” he noted. “Hopefully that will diminish some of the challenges.”