How Nigeria lost 40% aviation market share over trapped $800m –Travel consultants

The inability of the foreign airlines to repatriate their trapped $800 million from ticket sale accruals has cost Nigeria a blistering 40 per cent loss in air travel market share in one year.

For two years running, the offshore carriers have been at loggerheads with the federal government over their detained funds and the $60 million recently released by the Central Bank of Nigeria is a far cry from the 50 per cent of their trapped funds being demanded by the foreign airlines before they can be pacified.

The aggrieved carriers, through their union, the Association of Foreign Airlines and Representatives in Nigeria (AFARN), have warned that since they are unable to repatriate their funds from Nigeria, they will be left with no option than to toe the path of Emirates and Etihad, the two global airlines that suspended their flights to Nigeria about two years ago.

The Vice President of the National Association of Nigeria Travel Agencies (NANTA), Yinka Folami, told Daily Sun that because foreign airlines operating in Nigeria are having difficulties repatriating their revenue generated from ticket sales, they blocked their lower inventories to travelers who wish to buy tickets from Nigeria. This, he said, was one of the reasons why the cost of international flight from Nigeria is very high.

He added that as many air travelers now dread flying from Nigeria, they found solace in booking their tickets from neighbouring African countries, Europe and from the United Kingdom.

“From my calculation, in the last one year, about 30 to 40 percent of Nigeria’s travel market share has been eroded because of the problem caused by the inability of foreign airlines to repatriate their funds. When your client wants to travel and you tell the person the price and because it is too high, they tell you that they have told their relative or friend who lives in the UK or who lives in Europe or West Africa to buy it for them because flights are cheaper when you buy from outside Nigeria. In fact, some travel agents now collaborate with their foreign counterparts to book tickets for clients but any ticket not booked in Nigeria does not record as revenue and is making the country lose a lot of money. We are appealing to the government to address this issue, because if things continue like this, a lot of direct and indirect jobs would be lost,” he said.

AFARN President, Dr. Kingsley Nwokoma, told Daily Sun that despite the fact that foreign airlines pay aviation agencies for their services in dollars, it is unfortunate that they have been unable to repatriate the funds which rightfully belongs to them and that there has been no commitment from the FG on when more funds would be released.

“After the $61m was released, there has been no commitment from the government when the next batch of payment would be made. What the government is owing is $820m and only the amount released so far is insignificant. We had meetings even with the new Aviation Minister and he promised that he would try his best and that is what probably led to the release of the $61 million. What the airlines want is for at least, an arrangement where a specified amount would be released quarterly which would help get things out of the way. Just like the way Emitrates and Etihad left, some of the airlines may have to go if nothing is done because the money that is used to service Nigeria is gotten from other climes,” he said.

Reacting to the impasse, an aviation security expert, Capt John Ojikutu (retd), told Daily Sun that if foreign airlines carry out their threat to suspend operations in Nigeria, it would have devastating economic consequences for Nigeria.

According to him, 80% of the country’s earnings in commercial aviation would be gone. He also said thousands of direct and indirect jobs will be lost, thus worsening the unemployment nightmare.

“If foreign airline stop operations, it would have serious implications because 80% of our earnings in commercial aviation will be gone. If the Federal Airport Authority of Nigeria (FAAN) Passenger Service Charge is $100 on each of the two million international passengers, average of $4,000 landing/parking charge on about 40,000 institutional flights and $1/kg on about 500,000kg cargo, etc. How much would that be? For the Nigerian Airspace Management Agency (NAMA), the average is about $500/flight navigational charges on about 40,000 international flights and the Nigeria Civil Aviation Authority (NCAA) at $20 security charges per passenger and we have an average of two million passengers. Ground handling services providers collect $2,500/flights on 40,000 flights and fuel marketers collect $1/litre on about 25,000ltr/aircraft on the 40,000 flights. Go do the calculations and tell those in the administration of the government to tell us where the forex earnings made in the country are or should be,” he said.

Another expert, Olumide Ohunayo, told Daily Sun that local airlines would be unable to fill any vacuum that would be left by a foreign operator, adding that it was not right for Nigeria to renege on the Bilateral Air Services Agreement (BASA) signed by the host countries of the offshore airlines.

“Our local airlines can’t fill the vacuum that would be created if foreign airlines stop their operations. Their funds should be remitted to them as enshrined in the BASA. We make so much noise about remitting the funds to them and you will be surprised that out of the $61 million that was announced, maybe it is only 50% that would get to the airlines but they won’t come out to talk. These foreign airlines pay their charges to our aviation agencies in dollars, the government doesn’t collect naira, yet you are holding on to their dollars. It is a problem that we must address. Again, if we cannot reciprocate, can we have a commercial agreement which would be a win-win for each party, where the airlines operate our slots on our behalf and they pay us for passengers carried?” he said.

Another expert, Amos Akpan, who spoke to Daily Sun on the issue, said the economic implications if some foreign airlines leave Nigeria because of their inability to retrieve their trapped funds would mean that Nigeria is not a place to take out profits accrued to investments and that the host countries of the foreign airlines may make their environment hostile to Nigerian airlines by way of reciprocity.

On the threats by AFARN, he said: “It is a pressure group that does not warrant any member of the group to compromise her unique business strategy. For instance, Emirates pulling out of the route caused Qatar and Ethiopian to increase its frequencies such that Port Harcourt and Kano became more visible on their pax/cargo data sheet. If not for the strategic implementation of aeropolitics by UAE, Air Peace would be operating with full payload seven frequencies on Lagos-Dubai-Lagos, courtesy of the withdrawal of Emirates. But Ethiopian and Qatar have cashed in on that. The economic implications if some foreign airlines leave Nigeria because of inability to retrieve their trapped funds are many. The International community will interpret that to mean, “not a place to take out profits accrued to investments”. Indeed you might loose your capital. I recommend continuous dialogue with the foreign airlines and regular payments on outstanding even in small amounts until it’s all defrayed. But we must make very strong case for Nigerian airlines to operate these foreign routes because some of our airlines have demonstrated capacity to do so.”



Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top