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.
The Nigerian Civil Aviation Authority (NCAA) has taken action by suspending the permits of three private jet operators due to their involvement in commercial flights.
Chris Najomo, the Acting Director General of the NCAA, issued this suspension during a briefing to all airlines on Tuesday.
Additionally, Najomo ordered a re-evaluation of all PNCF permits within a 72-hour timeframe.
The head of the NCAA stated that Festus Keyamo, the Minister of Aviation and Aerospace Development, had instructed the discontinuation of private jets’ commercial use in 2023.
Despite this directive, the operators persisted in their commercial activities.
Najomo said “Subsequently, in March 2024, the NCAA had issued a stern warning to holders of the permit for non commercial flights, PNCF, against engaging in the carriage of passenger cargo or mail for hire and reward.
“The Authority had also deployed its officials to monitor activities of private jets at terminals across the airports in Nigeria.
“As a consequence of this heightened surveillance, no fewer than three private operators have been found to be involved in violation of the annexure provision of their PNCF and Part 9114 of the Nigeria Civil Aviation Regulations 2023.
“In line with our zero tolerance for violation of regulations, the Authority has suspended the PNCF of these operators.”
Minister Festus Keyamo has urged the Nigerian College of Aviation Technology in Zaria, Kaduna State, to create new solutions that can speed up the training of skilled air traffic controllers.
This call comes as Africa anticipates a need for 4,203 new air traffic controllers by the year 2037.
The minister made this statement on Wednesday during the 34th IFATAC Africa and Middle East Regional meeting in Abuja.
Addressing the gathering, the minister noted that the goal of training 4,203 new air traffic controllers aligns with the projection from the International Civil Aviation Organization (ICAO).
He further affirmed the ministry’s commitment to offering full support to NCAT, ensuring it not only meets but surpasses its mandated duties and roles.
He said “ICAO projects that by the year 2037, Africa will require 4,203 new air traffic controllers. The onus rests on the Aviation College of Aviation Technology (NCAT) to develop innovative ideas solutions to accelerate the training of new and proficient air traffic controllers.
The minister, represented by acting director Michael Chiko from Air Safety and Administration, highlighted the rapid evolution of the air traffic control profession.
He stated “The profession of air traffic control has evolved rapidly, transitioning from simple flag signalling to sophisticated technologies. This evolution facilitates management of the surging number of aircraft traversing our
skies daily.
“As a vital, indispensable component of air safety, air traffic controllers are responsible for the safe, orderly and expeditious flow of air traffic. Therefore, I am not unaware of the critical role you play and invariably, the heavy burden you bear.
“This burden is compounded by increased air traffic, workforce shortages, technological shifts; necessitating rigorous training regimes.
“More so, with the emergence of unmanned aerial vehicles, reshaping dynamics and challenging the norm, it is thus paramount to prepare for the future and indeed Nigeria like other countries must prepare for the future.” he added
During the event, Mr. Lawrence Pwajok, representing Engr. Mohammed Odunowo, the managing director of the Nigerian Airspace Management Agency (NAMA), emphasized the relevance of the 34th IFATCA Africa and Middle East Regional meeting’s theme, titled ‘Shaping the Future: Trends and Insights On ATC Training for Tomorrow’.
Pwajok highlighted the significance of this theme, especially as air traffic control commemorates 100 years since its inception.
He suggested examining the historical perspective of air traffic control, tracing its origins from Croydon airport a century ago to its present form in modern airports like Dubai, Istanbul, JFK, Charles De Gaulle, among others.
This historical comparison aims to provide insights into the potential trajectory of the future air traffic control system over the next century.
He added “It is obvious that the future air traffic management system will be characterised by extensive application of automation, digitization and artificial intelligence.”
Festus Keyamo, the Minister of Aviation and Aerospace Development, underscored the obligation for airlines to provide compensations in cases of flight cancellations and delays.
Festus Keyamo conveyed this directive during a meeting with the heads of agencies affiliated with the ministry on Tuesday.
He said, “We are not deaf to the cries of Nigerians about delays and canceled flights. The law is there and we are looking at how to enforce those laws for compensation of Nigerians who bear the brunt of cancellation of flights and disrupting the activities.
“The process of grounding the airline or taking the airlines to court will create more problems.
“So if the reason for the delay and cancellation of flight is their fault they must pay compensation. And what I am suggesting is that if they don’t get cash back they must get some rebate when they buy next ticket.
“I have set up a committee to look into it such that they can generate a code that they can use when they want to purchase the next ticket.
“We are concerned about the passenger satisfaction and the safety of the air travelers,” he said. The minister directed the Director-General of the Nigerian Civil Aviation Authority to prepare a weekly catalogue of canceled flights.
He further instructed the Nigeria Safety Investigation Bureau to finalize investigations into all air accidents and mishaps within the upcoming 10 days.
He said: “For the recent incidents that happened recently, some minor, and others classified as serious incidents although there were no fatalities. The NSIB is investigating these incidents and I have directed them that within 10 days from today they must submit their report of the incidents and what actually transpired.” he added
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