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Airlines warn blocked funds could hamper Africa growth

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About half the $1.6 billion frozen in Africa is tied up in Nigeria, says RwandAir CEO Yvonne Makolo

Global carriers have warned that concerns over blocked airline funds in Africa and elsewhere could lead to interruptions in air services if there is no progress in talks to unfreeze money owed.

About $1.6 billion of funds are being withheld in various African countries because of currency shortages or other problems, the International Air Transport Association (IATA) said in a briefing on the launch of an initiative to boost African aviation.

“The people who suffer as a result of these blocked funds are consumers in these markets, because you cannot expect airlines to continue to provide services if in effect they’re not being paid,” IATA director general Willie Walsh said.

The issue of airline funds being blocked in some countries where carriers operate has been rising as demand for hard currency outpaces supply, with IATA stepping up efforts to whittle down a deficit that grew 25 percent in the last six months of 2022 alone.

According to the Geneva-based body, which represents most of the world’s major airlines, Nigeria tops the list of countries holding back funds, with Algeria and Ghana also involved.

A total of $2.4 billion is being blocked worldwide.

Nigeria faces severe shortages of foreign currency, meaning airlines cannot easily convert local currency to repatriate revenues earned from ticket sales by foreign airlines.

Aviation minister Hadi Sirika has said he can only continue to urge the central bank to make dollars available to airlines.

A spokesperson for the Central Bank of Nigeria did not immediately respond to a request for comment on Monday.

About half the $1.6 billion frozen in Africa is tied up in Nigeria, RwandAir chief executive Yvonne Makolo told the IATA briefing.

Makolo, designated as the next chairperson and first female leader of the board of the influential IATA, also called for faster progress towards setting up a common aviation market in Africa.

Efforts to liberalise flying, echoing Europe’s single aviation market, have been under discussion since a landmark treaty known as the Yamoussoukro Declaration in 1988, which was updated 11 years later.

Supporters say liberalising frequencies, fares and capacity would lift barriers that in the past have increased costs.

But despite a fresh initiative by the African Union to create a single African air transport market in 2018, backed by more than 30 states, implementation has been slow.

Analysts say some carriers fear they would be exposed in a market already pinched by competition from the Gulf and Turkey.

Makolo said freeing up the movement of goods and people by air would support the flagship African Continental Free Trade Area, which the World Bank estimates could lift tens of millions out of poverty by 2035.

“It’s an exciting opportunity for the continent, which we really need to take advantage of as quickly as possible,” she said.

Africa’s aviation market is recovering faster from the pandemic than the overall industry but is expected to remain in loss, due in part to higher costs and weak infrastructure.

Traffic is expected to double by 2035, IATA said.