Aviation
Airlines Struggle With Trapped Funds As Fares Soar In Nigeria
Airlines operating in Nigeria are struggling with trapped funds, which have risen sharply in recent months despite efforts to reduce them.
According to a recent report, airlines’ trapped funds in Nigeria increased from $744 million in March to $802 million in April, despite measures to collect ticket sales in dollars.
One of the main reasons for the increase in trapped funds is the significant rise in fares for passengers paying in naira.
For instance, a return ticket from Nigeria to London has gone up from N350,000 to about N1.5 million and N1.8 million (for passengers paying in naira). This has discouraged passengers from purchasing tickets, forcing them to use dollar cards instead.
According to Susan Akporiaye, President of NANTA, “a Lagos-London return ticket that cost N350,000 is now being sold for N1.8 million. If you issue one economy class ticket, it should have been just N350,000 that is trapped, but now one economy ticket means N1.8 million is trapped. This means it will triple the effects of trapped funds because these are selling higher, and because we are selling higher, the trapped funds are increasing. But if we are selling N350,000, it should not have increased.”
Akporiaye explained that high fares are the reason the trapped funds will keep increasing. She said that in such a short time, the trapped funds have moved from $700m to over $800m because, for instance, a business class ticket in the US that was sold for N2.5m is now almost N6m.
NANTA stated that the measures deployed by airlines to reduce ticket sales in naira have seen airlines recoup over 50% of their ticket sales in foreign currencies, thereby reducing the amount of money trapped in Nigeria.
Airlines have stopped travel agents in Nigeria from issuing tickets emanating from other countries into Nigeria since last year in a bid to reduce the amount of money that would be trapped in Nigeria.
To reduce ticket sales in naira, airlines have deployed various measures, such as blocking low ticket inventories and leaving high inventories to be sold in naira only. However, these measures have not been effective in reducing trapped funds.
The development has since seen Nigerian travellers bypass travel agents in Nigeria to purchase tickets from agents in Ghana and other African countries over skyrocketing fares as a result of the trapped funds.
This is in a bid to cushion the effect of their trapped funds in Nigeria. Delta Airlines, the sole US carrier flying into Nigeria from its base in Atlanta Georgia, has been selling air tickets to travellers in dollars.
Jimmy Echelgruen, the airlines sales director for Africa, the Middle East and India, confirmed the development.
Bankole Bernard, chairman of Airlines and Passengers’ Joint Committee of the International Air Transport Association, said that despite challenges facing Nigeria’s travel sector, foreign airlines operating in Nigeria realised over $1.1 billion from ticket sales in Nigeria in 2022.
Bernard, who disclosed that the foreign airlines are making good money from Nigeria, even though the trapped funds challenges still persist.
He said: “The airlines have sold more. In the whole of Africa, Nigeria sales are still the highest. We have done over $1.1billion in 2022. We are doing much better than our contemporaries.
“We are a good market and a market that any airline would want to come into. Nobody will talk about the good side of this market. Nigerians are still travelling. The only thing is that travel agents are losing business to outside the country. Most of us are buying tickets from other travel agencies from around the world.” he added.
An Abuja-Accra flight experienced technical difficulties mid-air on Friday, forcing it to return to Abuja, shortly after departure.
The Nigerian Safety Investigation Board (NSIB) made the disclosure in a statement, adding that it has launched investigation into what it described as a serious accident.
Director, Public Affairs and Family Assistance, NSIB, Bimbo Olawumi Oladeji stated that preliminary investigations revealed the aircraft experienced an engine number two indication issue.
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It was gathered that the aircraft, with registration number 5NKAL which was operating a flight from the Nnamdi Azikiwe Airport, Abuja (DNAA), to Kotoka International Airport, Accra (DGAA).
She explained that four persons were onboard when the incident occurred. The crew immediately requested for a diversion back to Abuja due to the engine indication.
Oladeji added that the crew managed to safely land the aircraft at Abuja Airport at 18:16 UTC.
There were no injuries reported, and all individuals on board are safe.
Nigeria has acquired 12 pre-owned Alpha Jets from the French Air Force as part of efforts to enhance the operational capacity of the Nigerian Air Force (NAF).
The deal, facilitated through SOFEMA, a French military and aeronautics company, was announced by Olusegun Dada, Special Assistant to President Bola Tinubu on via X on Thursday.
He said, “All the 12 aircraft are ready for shipping.”
The Alpha Jet, a product of Franco-German collaboration, is a versatile military aircraft designed for light attack and advanced training missions.
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Equipped to carry bombs, rockets, and missiles, the aircraft also features a gun pod for close air support.
The NAF already operates 11 Alpha Jets, but this latest procurement signals a significant boost to its fleet.
Dada also confirmed that the Air Force is expecting 24 M-346FA light attack aircraft, ordered during the administration of former President Muhammadu Buhari.
The first batch of these Italian-made aircraft is expected to arrive early next year.
Air Chief Marshal Hasan Abubakar, the Chief of Air Staff, described the acquisitions as a testament to President Tinubu’s commitment to bolstering the armed forces.
“This renewal of our aircraft fleet reflects the government’s commitment to ensuring the safety and security of Nigerians,” Abubakar said.
The announcement comes on the heels of President Tinubu’s three-day state visit to France, where he met with French President Emmanuel Macron.
The visit, which took place from November 27 to November 30, highlighted deepening ties between the two nations.
To ensure the sustainability of its expanding fleet, the Air Force has proposed establishing a local maintenance hub.
Speaking in October, Abubakar noted that six units of the M-346FA aircraft were already in production, with the initial batch of three expected to be delivered in early 2025. The full fleet is projected to arrive by 2026.
“These developments underscore the importance of creating a domestic support system for the long-term upkeep of our aircraft,” Abubakar added.
As the holiday season draws near, Aero Contractors has introduced a minimum ticket price of N80,000 for all local flights.
The move, which will last until January 2024, aims to ease the financial burden on Nigerians amid the high cost of living.
Ado Sanusi, Managing Director of Aero Contractors, made the announcement on Tuesday during a press briefing, describing the fare reduction as a gesture to help Nigerians celebrate Christmas and the New Year without the stress of steep ticket prices.
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Sanusi said, “We understand the economic hardship Nigerians are facing, especially with high ticket prices, and we know the holiday season is nearby.
“In the spirit of Christmas, Aero Contractors has introduced what we call pocket-friendly Christmas prices. These fares, starting at N80,000, will apply to all our destinations, allowing Nigerians to travel without excessive costs.”
As of Tuesday afternoon, an economy class ticket from Lagos to Abuja was priced at N99,643, while business class tickets were being sold for N189,167.
Sanusi further explained that the initiative was designed to make it easier for families to reunite during the holidays.
“This is a way for us, as an organization with a long history of serving Nigerians, to give back to our loyal customers. We want to make it possible for families to meet their loved ones during this festive season without worrying about exorbitant travel costs,” he added.
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