Economic Crisis Force Foreign Airlines Out of Nigeria

By Chinedu Eze

Low value of Naira and the inability of foreign carriers to repatriate their revenues have forced United Airlines and others to withdraw services to Nigeria.

 As at March 31, 2016, foreign airlines funds trapped with the Central Bank of Nigeria (CBN) was about $575 million and there are strong indications that the airlines would lose substantial value of this money with the devaluing of the Naira by the federal government which has become imminent.

 It is projected that if government devalues its currency, foreign airlines may lose about 45 per cent of their revenues with the CBN.

 This, experts believe, is one of the reasons why some of the airlines are pulling out of Nigeria and this would also trigger another wave of outrageous fares in their bid to get back what they have lost.

 On Thursday United Airlines expressed its plan to stop flights to and from Nigeria and Air France, Qatar and Etihad have also issued a two-month revenue warning on tickets sold in Naira which they must be allowed to repatriate or they would pull their flights from the country.

 In April Spanish national airline, Iberia announced it would pull out of Nigeria and wound down its operations by May 12. The airline explained that it pulled out of Nigeria following protracted passenger drought since late last year.

Iberia said its decision to leave Nigeria was in response to the difficult times and the inability of the airline to record high load factor as it used to do, as economic crunch bedeviling the nation had depleted the finances of those who otherwise would travel out of the country on business, tourism or leisure.

The International Air Transport Association (IATA) during its conference in Abuja on Monday said it had been talking with the federal government on how to repatriate airlines funds trapped in CBN.

THISDAY learnt that foreign airlines stopped repatriating their revenues as at when due since October last year due to the dollar shortage in the country brought in by the low earnings from crude oil sales.

 Industry experts have expressed the view that more airlines may be tempted to pull out of the country if the hard time continued.

Inside source told THISDAY that the load factor was not good because of the financial crunch, which had kept potential travelers out of the airports.

 “Foreign airlines adjusted their fares and stripped them of all promotional tickets. This hiked the fares and made them beyond the reach of ordinary travelers, so it is difficult for people to fly,” the source said.

He also explained that United Airlines may have decided to pull out of Nigeria because it had low load factor and the inability of airlines to repatriate their revenues make it difficult for some airlines to continue to operate in Nigeria.

 “When the market improves they will come back. Airlines cannot afford having their revenues trapped for a long time because they need money to pay for fuel, renew their lease and pay other suppliers and when one route suffers hiccups it may affect the whole operations of the airline,” the source also said.

Also industry consultant and CEO of Belujane Konsult, Chris Aligbe, told THISDAY United might have decided to leave Nigeria because its market has started shrinking because of the economic crisis.

“American airlines don’t have patience. Any instability is rejected and they will leave immediately the environment seems unfavourable because they do not invest in Nigeria. But airline like Turkish is not thinking of leaving Nigeria because it is investing in the country. American airlines don’t have time. It is the inability to repatriate their funds that is making them to leave”, he said.

Aligbe noted that the air travel market was shrinking and that explained why British Airways had cut down its service by reducing the size of its aircraft from B747 to B777 in its Lagos to London route. The airline is also considering reducing its frequency to Lagos by one flight.

 Aligbe also noted that this would be good for Nigerian airline, Arik that operates to US to use the vacuum created by the pulling out of United to attract more passengers.

“This is an opportunity for Nigerian airlines like Arik. It can attract more passengers to its US flights but it should not jerk its fares because of this opportunity it has; it should try to retain these new customers.

 “This reality now will show that Nigeria needs to grow its own carriers. National airline is a necessity. As days go, it becomes clear that Nigeria needs to have its airlines operating international routes. We need to support Nigeria airlines,” Aligbe said.

 There are indications that more international carriers may leave Nigeria as the economic crisis continues to bite harder.