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…Says Africa still owes airlines $768m
The African Airlines Association (AFRAA) Blocked Funds Task Force has said it worked with the International Air Transport Association (IATA) and both organisation played a crucial role in helping Nigeria clear nearly $1 billion in blocked airline funds within a short period, drastically easing one of the most severe cash-flow crises facing carriers operating in the country.
This was disclosed by the Head of Government Affairs at Kenya Airways, Dalmas Okendo, who is also a member of the AFRAA Blocked Funds Task Force, during the August edition of AFRAA’s SkyConnect Leadership Dialogues, held on Wednesday and monitored by Daily Sun. The topic of the session was: “From Blocked Funds to Seamless Payment: Fixing Africa’s Airline Financial Flows.”
The dialogue examined why airline revenue remains trapped in several African countries, the toll this takes on carriers’ liquidity and cash flow, the resulting damage to air connectivity across the continent, and the steps airlines and the industry are taking to navigate the crisis.
According to Okendo, Nigeria was, as recently as 2023, one of the most severe cases of blocked airline funds anywhere in the world, with the amount trapped in the country approaching $1 billion. He said: “The AFRAA Blocked Funds Task Force has had successes and i’ll give you the example of Nigeria. In 2023, Nigeria was actually leading in terms of exposure, the magnitude of blocked funds there was approaching a billion dollars. But thanks to the efforts of the task force and like-minded organisations such as the International Air Transport Association, Nigeria significantly reduced its blocked funds within a short period. Today, if you look at the list of exposed countries, Nigeria isn’t even on it.”
He said the Task Force whose membership is open to all AFRAA airline members used the strategy of bringing affected airlines together to share their experiences, collectively lobby and organise advocacies while directly engaging government officials, including central banks, ministries of aviation and transport on how to ease repatriation of airline revenue. Okendo noted that similar improvements have been recorded in other African countries as a result of the task force’s engagement. He however declined to name them, citing ongoing negotiations.
Okendo attributed the recurring blockage of airline funds partly to the volatile nature of African currencies. He explained that when local currencies are devalued which is a frequent occurrence across the continent, airlines and their service providers absorb heavy losses, which pushes many local suppliers, such as ground handlers and caterers, to insist on being paid in hard currency even where airlines are struggling to access foreign exchange.
He said the mismatch between airlines’ local-currency revenue and service providers’ hard-currency demands, combined with weak administrative processes for approving repatriation is the reason for the blocked funds crisis across the continent.
Okendo credited IATA as a key partner in the campaign that led to Nigeria’s turnaround, describing the collaboration as very crucial to the pressure that made the federal government to act. He said the task force continues to work alongside IATA and other like-minded bodies to press governments to honour the Bilateral Air Service Agreements, which provide for airlines to repatriate their earnings without bureaucracy. He said globally blocked airline funds stood at about $2.6 billion in 2023, falling to roughly $1.78 billion in 2024 and to around $1.2 billion last year. He said approximately $768 million of that current total is blocked within Africa and spread across about 14 countries. He however raised the alarm saying that new countries are emerging on the blocked-funds list even as older cases are resolved citing countries like Algeria which he said are now near the top and Mozambique which he said is another emerging concern. He said the task force intends to engage both countries the same way it engaged Malawi, Burundi and Nigeria.
Okendo used the session to renew calls for African governments to classify aviation as a priority sector for foreign exchange access, arguing that the industry’s role in keeping the economy running is always under-appreciated.
He outlined three steps he believes governments should take to permanently resolve the blocked funds crisis which are opening up markets to allow ticket sales and other airline commercial services in both local and hard currency; streamlining administrative processes to eliminate bureaucratic bottlenecks that delay repatriation; and honouring the air service agreements they have signed including the Single African Air Transport Market and the Yamoussoukro Decision (YD).
He said: “The challenge of blocked airline funds isn’t unique to Africa; there are other regions dealing with blocked funds, and they have good reason to borrow this solution from Africa. That said, platforms like PAPSS are ultimately intermediaries. It isn’t the default position every airline actually wants. The default position would be governments facilitating airlines directly, as provided for under Air Service Agreements, to repatriate their funds in real time and seamlessly, without the administrative and bureaucratic hurdles we currently see. If that were achieved, we wouldn’t need intermediaries like PAPSS at all but for now, PAPSS and similar solutions exist to bridge that gap.
“What we want is a situation where the spirit and the letter of bilateral air service agreements are honored and airlines are properly facilitated. And remember every solution comes with a cost, however small, and for now that cost is still borne by the airlines. It eats into the limited revenues airlines earn in these markets, and that’s not something we can simply wish away. There’s still a great deal of work ahead for the Blocked Funds Task Force. We’re seeing new entrants to the blocked-funds list, countries like Algeria are now near the top, which means more work for the task force. We’ll need to engage with the governments and agencies in countries like Algeria and Mozambique, the same way we’ve engaged with Malawi, Burundi, and Nigeria, to facilitate the movement of airline resources.”
