Nigeria's WORSENING economic crisis forces foreign airlines to pull out in DROVES

Nigeria's economic crisis forces foreign airlines out 

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.

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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.

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“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.

Thisday

British Airways may exit Nigerian routes

British Airways is evaluating its routes to Nigeria, adding to aviation industry pressure on the Federal Government as sister carrier, Iberia, and United States competitor, United Airlines, halt flights to the country as traffic stutters and currency controls delay access to revenue.

The United Kingdom carrier is struggling to repatriate its share of the $575m that Nigeria currently owes to airlines globally from tickets sold, according to the Country Manager for British Airways and Iberia in Nigeria, Mr. Kola Olayinka.

Spanish carrier, Iberia, had on May 12, 2016 halted flights to Lagos “due to very difficult operating circumstances and dwindling passenger numbers,” he said in an e-mailed response to questions.

The International Air Transport Association Chief Executive Officer, Mr. Tony Tyler, met with Vice President Yemi Osinbajo earlier in the week over the matter, Bloombergreported.

In a statement on Wednesday, IATA warned that Lagos could lose its status as a hub to West Africa. United Airlines informed employees on Wednesday that it would end flights from the US to Nigeria on June 30 because of a lack of demand and difficulty in collecting payments.

The Chief Executive Officer, IAG, the parent company for British Airways and Iberia, Mr. Willie Walsh, said last month that Iberia would stop serving Lagos after the low price of oil caused Nigeria’s economy to contract for the first time since 2004 in the first quarter.

Limits on dollar repatriation have been imposed by the Central Bank of Nigeria as reserves slip to $26.5bn, the lowest in more than a decade, from more than $30bn in early 2015.

“Exiting Nigeria is a very big decision” and “not taken lightly” following London-based British Airways’ 80 years of operations in the country, Olayinka said. “I believe very strongly that we will keep evaluating the situation, but I can assure you, BA is very committed to Nigeria.”

The government is assessing the situation, while the CBN Governor, Mr. Godwin Emefiele, has suggested a flexible exchange rate regime that would end the naira’s peg to the US dollar, Olayinka said.

The IAG is awaiting details of the policy “so that we can start the process of rebuilding,” he said.