Business

Foreign airlines to shutdown over credit crunch

Published

8 years ago

May 29, 2016

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The rippled effect of the credit crunch which continues to bite harder in different sectors is also threatening the existence of most of the foreign airlines operating in the country as many of them are finding it increasingly difficult to survive.

Investigation by Ripples Ngeria revealed that majority of the foreign carriers are experiencing difficulties in repatriating sales proceeds which are mostly in dollars as a result of the forex policy.

Already two foreign carriers namely: Iberia and United Airlines have announced their exit from Nigerian route citing operational and financial challenges.

Iberia, the Spanish national carrier took the decision to pull out of Nigeria in view of the financial predicaments brought upon it by the CBN forex policy, which prevented it from repatriating its proceeds made in Nigeria for many months now.

A source hinted at the weekend that three other carriers specifically: Etihad Airways, Qatar Airways and Air France may have issued notice to the Ministry of Aviation to restrict flights to Nigeria if the current foreign exchange policy is not reviewed.

Checks by Ripples Nigeria revealed that over $600 million is trapped in the country from ticket sales that cannot be repatriated by foreign carriers to their home countries on account of the new foreign exchange policy.

The new foreign exchange policy, experts say has put a limit to the amount foreign carriers could take out of Nigeria.

Some $575 million was due to carriers as of March 31, 2016 according to the International Air Transport Association, even after the CBN released funds to pay off part of the backlog.

Sources say the notice for withdrawal of service by foreign carriers has sent jitters to the industry over possible backlash.
Against speculations that the British Airways may be exiting the country, the management of the airline said such reports were farther from the truth.

The Country Manager, Mr Kola Olayinka in a statement at the weekend said the airline was not contemplating such decision at this time.
Nigerian Vice President Yemi Osinbajo told IATA Chief Executive Officer Tony Tyler last week that airlines must agree “a realistic and achievable payment schedule,” the trade body said. Carriers could begin severing links if the issue isn’t resolved, damaging Lagos’ standing as an aviation hub, IATA said.

Carriers including United Airlines, Delta Air Lines Inc. and American Airlines Group Inc. pulled capacity from Venezuela during a similar dispute in 2014 as a 61 percent inflation rate limited the state’s access to dollars. Airlines had the equivalent of $3.9 billion trapped in Venezuelan bolivars, IATA estimated.

According to United Continental Holdings Inc., operators of the airline, the daily route from Houston to Lagos had not met target for years but was kept alive because of its importance to Texas-based customers.

In a note to its employees United declared that its last flight will be on June 30, after which Delta Airlines Inc. will be the only major U.S. carrier flying to Africa.

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