The $1.68 billion airline cash embargo in African nations has once again drawn the wrath of the International Air Transport Association (IATA).
The ongoing problem is detrimental to the airlines, the affected economies, and the expansion of air travel on the continent, according to IATA, the clearinghouse for more than 290 international airlines.
In a similar vein, the organisation has cautioned Nigeria and other African nations from enacting new taxes, levies, or increased fees for air travel, trade, or tourism in light of current circumstances.
IATA revealed during a meeting with delegates this week in Entebbe, Uganda, during the 55th annual general assembly of the African Airlines Association (AFRAA) that $1.68 billion in airline funds was still stalled throughout the continent. This is true even after IATA worked with the corresponding governments to facilitate repatriations from Angola, Ethiopia, Ghana, Nigeria, and Zimbabwe.
Recall that a complex foreign exchange liquidity issue has left foreign airlines’ $793 million stuck in Nigeria as of August 2023 arrival. Of the total, $300 million is legacy debt that the airlines have accumulated but that the Central Bank of Nigeria (CBN) has not yet sent to IATA.
AFRAA delegates were informed by Kamil Alawadhi, Regional Vice-President for Africa and the Middle East at IATA, that as of September 2023, $1.68 billion in airline funds—out of $2.36 billion globally—were stalled throughout Africa.
Alawadhi stated, “The impact on connectivity is devastating and the numbers are alarming.” He emphasised once more how capital-intensive aviation is and how important cash flow is to an airline’s capacity to remain in business.
“Airlines’ operations and route selection are significantly impacted when they are unable to repatriate their funds. However, the risk of blocked cash affects more than simply airlines; the nations that restrict the payments also suffer as a result.
It damages investor confidence and reputation, as well as the nation’s economy and connections. Modern economies are built on the backs of aviation, which is not just an economic facilitator. He asked nations to develop long-term ways to free up frozen money and give priority to aviation.
The Vice-President went on to say that the epidemic caused huge losses to Africa’s aviation sector, which is currently recuperating. Governments should refrain from imposing new taxes, levies, carbon taxes, or higher fees in order to make up for this shortfall.
According to him, these actions would simply increase the cost and decrease the accessibility of air travel in Africa, where average airfare is already 30% more than the industry average and jet fuel costs are 10%–20% more than the norm worldwide.
Price-conscious consumers would be deterred by higher costs, which would reduce demand and revenue for airlines as well as other aviation industry participants like airports, ground handlers, suppliers, and air navigation services.
“They would also impede economic growth and curtail prospects for generating income and jobs.” In a price-elastic market, high costs lead to high prices, which diminish demand and growth and eventually have a negative impact on connection.
“The message is clear: in order to ensure a fair and cost-effective operating environment that benefits a more connected continent, governments should adhere to the International Civil Aviation Organization’s (ICAO) policies on charges and infrastructure and consult with airlines and industry,” Alawadhi stated.
In a related development, South Africa is leading the way in Africa when it comes to the potential of Sustainable Aviation Fuel (SAF), surpassing the worldwide aviation industry’s goal of net carbon zero.
Roughly 65% of the reductions by 2050 may come from SAF; the remainder may come from improved propulsion technologies, efficiency, offsetting, and carbon capture.
IATA observed that in order to improve energy security, independence, and resilience for the African continent, the SAF industry will need to take advantage of feedstocks in practically every nation where Africa has a significant advantage.
Africa is a continent with enormous potential for SAF development and deployment. For instance, a thorough investigation led by WWF discovered that, under the most stringent sustainability guidelines, South Africa possesses the immediate technological capacity to create 3.2 to 4.5 billion litres of SAF yearly.
However, without the appropriate policy toolkit, African SAF manufacturing would only make slow progress. This begins with the requirement for a supporting policy framework that enables governments to create national strategic plans for sustainable aviation and involve all relevant parties.
