Thanks to a clearance by Nigerian government, the total amount of funds of international airlines blocked in various countries has declined by 28 pc. But airlines still have over USD 1.8 billion blocked in various nations, with Pakistan and Bangladesh accounting for 41 pc of total blocked funds.

The International Air Transport Association (IATA) has reported a 28 pc decrease in the amount of airline funds blocked from repatriation by governments. The total blocked funds at the end of April stood at approximately USD 1.8 billion, a reduction of USD 708 million or 28 pc since December 2023.

According to a press statement, IATA has reiterated the call for governments to remove all barriers to airlines repatriating their revenues from ticket sales and other activities in accordance with international agreements and treaty obligations.

“The reduction in blocked funds is a positive development. The remaining USD 1.8 billion, however, is significant and must be urgently addressed. The efficient repatriation of airline revenues is guaranteed in bilateral agreements. Even more importantly, it is a pre-requisite for airlines, who operate on thin margins, to be able to provide economically critical connectivity. No business can operate long-term without access to rightfully earned revenues,” says Willie Walsh, Director General, IATA.

The main driver of the reduction was a significant clearance of funds blocked in Nigeria. Egypt also approved the clearance of its significant accumulation of blocked funds. However, in both cases, airlines were adversely affected by the devaluation of the Egyptian Pound and the Nigerian Naira.

IATA says that at its peak in June 2023, Nigeria’s blocked funds amounted to USD 850 million, significantly affecting airline operations and finances in the country. Carriers faced difficulties in repatriating revenues in US dollars, and the high volume of blocked funds led some airlines to reduce their operations and one carrier to temporarily cease operations to Nigeria, which severely impacted the country’s aviation industry. However, as of April 2024, 98 pc of these funds have been cleared. The remaining USD 19 million is due to the Central Bank’s ongoing verification of outstanding forward claims filed by the commercial banks.

“We commend the new Nigerian government and the Central Bank of Nigeria for their efforts to resolve this issue. Individual Nigerians and the economy will all benefit from reliable air connectivity for which access to revenues is critical. We are on the right path and urge the government to clear the residual USD 19 million and continue prioritizing aviation,” says Walsh.

The situation has become severe in Pakistan and Bangladesh with airlines unable to repatriate USD 731 million, of which USD 411 million is blocked in Pakistan and USD 320 million in Bangladesh, of revenues earned in these markets.

“Pakistan and Bangladesh must release the USD 731 million in blocked funds immediately to ensure airlines can continue providing essential air connectivity. In Bangladesh, the solution is in the hands of the Central Bank, which must prioritise aviation’s access to foreign exchange in line with international treaty obligations. The solution in Pakistan is finding efficient alternatives to the system of audit and tax exemption certificates, which cause long processing delays,” says Walsh.

IATA says that eight countries account for USD 1.6 billion or 87 pc of the total blocked funds.