Foreign airlines repatriate over $4bn in 15 months

 

Foreign airlines repatriate over $4bn in 15 months

Nigerians have spent about $4.66bn on Foreign air travels in 15 months, according to findings by The PUNCH.

Data obtained from the Central Bank of Nigeria showed that the amount was sold to foreign airlines between the first quarter of 2022 and the first quarter of 2023.

Foreign airlines buy foreign exchange from the CBN to enable them to repatriate their ticket sale proceeds to their various home countries. About 25 foreign airlines currently operate into Nigeria

A breakdown of the CBN data showed that $496.44m was sold to foreign airlines in Q1 2022; $1.03bn in Q2 2022; $1.36bn in Q3 2022; $887.17m in Q4 2022; and $890.3m in Q1 2023. The figures indicate an increase of 79 per cent between Q1 2022 and Q1 2023.

The PUNCH observed that the highest amount was recorded in Q3 2022, with about $1.36bn.

Despite the amount sold to the carriers, foreign airlines have been struggling to repatriate their funds.

In March, the International Air Transport Association, the top global trade association of international airlines, appealed to the Nigerian government to allow international airlines to repatriate their funds trapped in the country.

IATA said airlines’ trapped funds in Nigeria rose to $743.7m in January from the $662m recorded last December.

“For over a year, Nigeria has been the country with the highest amount of Airline-blocked funds in the world,” the IATA said.

Since the amount increased from $450m in May 2022, to $464m in July of the same year, the trapped funds have been linked to some of the higher fares on Nigerian routes.

Fares

The PUNCH also observed that it is more expensive to fly from Nigeria than other West African countries like Ghana and the Benin Republic.

Findings by one of our correspondents showed that passengers flying via Turkish Airlines from the Murtala Muhammad Airport in Lagos to Heathrow Airport in London paid $3,295 for a one-way economy ticket while passengers from Cotonou International Airport in Benin Republic paid $1,256 for a one-way economy ticket to London, representing 162.3 per cent difference in air ticket price.

Comparison between Lagos-London flight and Accra-London flight showed a  49.6 per cent difference in air ticket price. Lagos passengers paid $3,295 compared to $2,202 paid by Ghanaians on the same date and airline.

Also, an economy flight ticket from Lagos to Toronto was pegged at $2,737 while Benin to Toronto was put at $2,018, representing 35.6 per cent increase compared with Accra to Toronto at $2,546, representing 7.5 per cent.

Checks on Turkish Airlines indicate that the Lagos-New-York one-way economy ticket costs $3,689 while Benin to New York was pegged at $2,493. Accra to New York trip was put at $2,562.

Meanwhile, a Lagos-Dubai flight was put at $944, while Cotonou-Dubai ticket was priced at $693. Accra-Dubai was put at $848.

Meanwhile, the Nigerian Civil Aviation Authority, the aviation industry regulator, recently released a three-month report on the activities of local and international flights.

NCAA report

In its report, the NCAA noted that the 25 international airlines which operated within the reviewed period had 24 flights cancelled, with 9,087 baggage delayed/ missing.

Of this figure, the report said 7,942 baggage were found. Also, about 39 per cent of international flights (inbound and outbound) which operated in Nigeria between January and March were delayed.

According to the report, of the 3,073 international flights operated within the aforementioned period, 1,193 flight schedules across 25 airlines were delayed.

The 30-page report revealed 870,776 passengers (375,700 inbound and 495,076 outbound ) passed through the nation’s international airport wing between January and March.

A review of cancelled flights showed that out of 1,114 international flights operated in January, seven were called off. In February, 13 out of 887 scheduled flights were cancelled—the highest recorded in the period under review, while only four of 1,072 operated flights in March were cancelled.

The report showed that Lufthansa recorded the highest number of cancelled flights, with six of its 147 operated flights terminated in the first quarter of this year. Qatar Air followed with four, while Asky and Rwanda Airlines had three cancelled flights each, among others.

During the period under review, the NCAA noted that it received 27 complaints from international operations and nine cases were resolved.

“However, most of the cases were resolved after follow-up and additional backlog from the previous months,” the report said.

Experts react

Experts have expressed concern over higher fares on Nigerian routes as the Nigeria Air project continues to face delays.

The controversial national carrier project has faced legal hurdles amid corruption allegations. The Federal Government has yet to invite the former Minister of Aviation, Hadi Sirika, to answer questions on the project.

Following the CBN forex reforms, air fares have increased by over 50 per cent on Nigerian routes. Airfares which used to be priced at 460/dollar, now went for 743/dollar as of Friday.

Meanwhile, the Chief Executive Officer, Centurion Security, Group Capt John Ojikutu, however, emphasised the need for Nigeria to establish three flag carriers in order to compete with international airlines.

He argued that the move would help to reduce capital flight and increase the country’s share of passenger traffic.

He said,”What we need to do is to establish at least three flag carriers to compete with international airlines that make an average of 30 flights daily to Nigeria. We should strive to make or reciprocate at least 30 per cent, if not 50 per cent, of the daily flights. This will enable us to share 20/30 per cent of the passenger traffic.”

He added, “The exchange rate has not necessarily made the figure high but the airfare is equally high. If foreign airlines can get forex at the official exchange rate, the airfare would not be as high as it is today. There is very little the government can do than to designate flag carriers among the domestic airlines to compete with the foreign airlines”

Also, a travel expert, Benard Bankole, highlighted several factors contributing to the foreign exchange shortage.

He said, ““First of all Nigeria is an import dependent country, which means that we will always have shortage of FX. Now, there is the balance of trade which we’ve not been able to do. For on our crude oil, we’re not producing enough and we’re not exporting enough.”

Bankole, who is also the CEO Finchglow Holdings Limited, however said the absence of a national or flag carrier was not a hindrance.

He noted that Air Peace, a local carrier, has been assigned numerous routes.

“However, the key concern is whether these airlines possess the capacity to effectively manage the additional foreign routes they request,” he added.

A airline expert and pilot, Capt. James Daniel, emphasized the need for Nigeria to reciprocate its Bilateral Services Agreement.

The Bilateral Air Services Agreement is based on reciprocity. Now, if foreign airlines have 20 rotations into Nigeria, then Nigerian carriers should have same into their countries. But unfortunately, Nigerian carriers are not exercising these privileges according to the BASA; so the foreign carriers have a monopoly and that is why the prices of tickets are so astronomical.”

The Head of Research at Zenith Travels, Mr Olumide Ohunayo, said Nigeria needed strong airlines to compete against foreign carriers.

 He said, “The Fly Nigeria Act did not see the light of day. Coming back to the issue at stake, it’s inevitable, the capital flight will continue until we build airlines that can compete, and meet the standards that international airlines can partner with. You cannot say until you have a national carrier, it is better to have flag carriers, the more the merrier. We must encourage our airlines to go out and move beyond single ownership. They must open up ownership and management to support this then we can now start talking about the Fly Nigeria Act.

He added, “The fares are high now because the demand is still very high, Nigerians travel a lot, we always have a reason to travel. The supply right now is meeting the demand, so we need to increase supply.”