Staff Report
Dubai, UAE
Cash-trapped countries such as Nigeria, Bangladesh, Algeria, Pakistan and Lebanon are among a number of countries that have blocked US$2.27 billion worth of funds owed to airlines as at April 2023, according to a statement by International Air Transport Association (IATA) that is threatening the global aviation industry and might disrupt cross-border travel, if not solved soon.
IATA on Monday said, a 47 percent jump in blocked funds hitting US$2.27 billion in April 2023 from $1.55 billion in April 2022, is severely affecting the global airline industry. Five countries represent 68 percent of the blocked funds with Nigeria topping the list with US$812.2 million, followed by Bangladesh with US$214.1 million, followed by Algeria with US$196.3 million, Pakistan with US$188.2 million and Lebanon with US$141.2 million in dues that will continue to rise.
Bangladesh has withheld $214 million worth of air tickets due to foreign airlines as at April 2023, as dwindling foreign exchange reserves is biting its economy hard, so much so that its government has started to default in paying energy bills to run power plants, resulting in acute power shortage. The story is similar to other countries who blocked the funds.
The country’s utility suppliers are forced to ration power output as its population is reeling from a 12-hour loadshedding everyday allowing limited power for families to charge their mobile phone batteries, and run household appliances amid rising heat as summer season sets in.
Air ticket sales are part of IATA’s Billing and Settlement Plan (BSP) system that is designed to facilitate and simplify the selling, reporting and remitting procedures of IATA Accredited Passenger Sales Agents, as well as improve financial control and cash flow for BSP member airlines. BSP is active in some 180 countries and territories. BSP currently serves more than 370 participating airlines with an on-time settlement rate of 99.999 percent. In 2017, IATA’s BSP processed $236.3 billion.
Most of the air ticket sales proceeds and taxes remain with the host country where the ticket has been issued from and the countries repay the airlines in regular intervals – some remitting the payments in every three months. However, due to the worldwide UA dollar crisis, certain countries hold the payment, in order to retain the US dollar reserves.
Airlines generated US$506 billion in sales in 2021, that were mostly processed through the BSP platform.
IATA director General Willie Walsh said: “Airlines cannot continue to offer services in markets where they are unable to repatriate the revenues arising from their commercial activities in those markets. Governments need to work with industry to resolve this situation so airlines can continue to provide the connectivity that is vital to driving economic activity and job creation.”
Dubai-based Emirates Airline, one of the worst victim of the current situation, last year suspended flights to Nigeria for blocking US$85 million funds the country owed to the airline.
