How Scarcity Of Dollars Has Reduced Ticket Sales For Foreign Airlines
As the naira crisis continues to worsen, foreign carriers operating in Nigeria have begun moves to reduce the total number of tickets they sell on Nigerian routes amid worsening dollar scarcity that has made it difficult for them to repatriate billions of naira in ticket sale proceeds to their head offices abroad.
The development will lead to a significant reduction in the about N1tn total ticket sales over 25 foreign carriers make on Nigerian routes.
This is happening as the International Air Transport Association–the global body for international carriers–said foreign airlines operating in Nigeria had been unable to repatriate about $144m (N60bn) in ticket sales back to their home countries, calling on the Federal Government to make forex available to the carriers to do so.
Already, United Kingdom mega carrier, British Airways, which make billions of naira in ticket sales from Nigerians annually, has issued a notice to travel agents informing them that it would be restricting ticket inventory in Nigeria due to exchange problems in the country.
The BA’s notice to travel agents, which was obtained exclusively by Sunday PUNCH, was titled, “BA notification to control inventory due to unstable exchange rate.”
The notice read, “I wish to inform you of British Airways intention to control their Global Distribution System inventory by removing all the lower classes from the GDS, leaving only the below classes to be sold and issued and we all know the cost implications to this: Economy Y, Premium Economy W; Business Class J; First Class F. This became necessary due to fluctuating and unstable exchange rate in Nigeria. I hereby implore you all to pay for and issue all pending BA bookings with you before this takes effect”
Travel agents who spoke to Sunday PUNCH said the notice, which came about a week ago, might take effect anytime soon according to BA officials in Nigeria.
The development means over 65 per cent of the total number of categories of Economy Class, Business Class and First Class tickets available for sale will be removed by BA as soon as the notice takes effect.
“We are really surprised by this move. BA is doing what some other airlines have done tactically. BA officials told us they can’t repatriate their ticket sales and this is affecting their operations. As it is now, they want to reduce the total number of tickets they sell in Nigeria with this move. Until the CBN makes dollars available to the airlines to repatriate their ticket sales proceeds, things might continue to get worse,” the chief executive officer of a leading travel agency told Sunday PUNCH on condition of anonymity to avoid possible backlash.
Meanwhile, findings showed that Virgin Atlantic had technically reduced its ticket inventory by making cheaper ticket classes available in dollars.
This, according to travel operators, will force intending buyers to patronise tickets that are available in dollars, instead of the ones available in naira.
Already, other Middle East and African carriers have begun moves to sell tickets in dollars by encouraging travel operators to buy in dollars.
Also, it was learnt that intending individual buyers who patronise the airlines head offices are encouraged to buy tickets in dollars in other to get cheaper fares.
Travel operators said most of the foreign airlines were asking passengers, who patronise them directly through their head offices, to pay into their domiciliary accounts.
Meanwhile, the Central Bank of Nigeria has said it will launch an investigation into reports that some foreign carriers have started the sale of tickets in foreign currencies instead of the naira.
The spokesperson for CBN, Mr Osita Nwanisobi, said the apex bank would investigate and take appropriate action if any carrier was found culpable.
“The CBN is going to investigate such reports and take appropriate action, even though we have yet to get official reports on that.”
But IATA, the global airlines’ body had called on Nigeria and other countries with exchange rate problems to ensure forex availablity to foreign carriers to repatriate their ticket sale proceeds.
IATA urged governments to abide by international agreements and treaty obligations to enable airlines to repatriate close to nearly $1bn in blocked funds from the sale of tickets, cargo space, and other activities.
IATA’s Director-General, Willie Walsh, said its member airlines were facing challenges in Nigeria and a few other countries.
Walsh said, “Governments are preventing nearly $1bn of airline revenues from being repatriated. This contravenes international conventions and could slow the recovery of travel and tourism in affected markets as the airline industry struggles to recover from the COVID-19 crisis. Airlines will not be able to provide reliable connectivity if they cannot rely on local revenues to support operations. That is why it is critical for all governments to prioritise ensuring that funds can be repatriated efficiently. Now is not the time to score an ‘own goal’ by putting vital air connectivity at risk.”
According to IATA, approximately $963m in airline funds are being blocked from repatriation in nearly 20 countries.
“Four countries: Bangladesh ($146.1m), Lebanon ($175.5m), Nigeria ($143.8m), and Zimbabwe ($142.7 m), account for over 60 per cent of this total, although there has been positive progress in reducing blocked funds in Bangladesh and Zimbabwe of late,” IATA said.
“We encourage governments to work with industry to resolve the issues that are preventing airlines from repatriating funds. This will enable aviation to provide the connectivity needed to sustain jobs and energise economies as they recover from COVID-19,” said Walsh.
Meanwhile, the Association of Foreign Airlines in Nigeria, the umbrella body of foreign carriers operating in the country, said carriers needed dollars to carry out the maintenance of their planes and run their operations.
As such, it said there was the need for the CBN to provide dollars for their members flying in Nigeria.
The President, AFARN, Mr Kingsley Nwokeoma, said, “As we all know, the industry like all other international sectors is dollar oriented. Inconsistent government policies have pushed some of the foreign airlines to start selling tickets in US dollars through certain means as a survival option
“It is worrisome that airlines in Nigeria can’t repatriate about $144m. Imagine if this situation is applicable to other countries, the industry will be in jeopardy. The government should know that without this repatriation, the airlines won’t be able to fund maintenance, operations, aircraft purchases, salaries and other commitments. The government has to seriously look into this and find a solution as this is embarrassing for a country like Nigeria.”
When contacted, Virgin Atlantic denied selling tickets in both local and foreign currencies.
A statement by Virgin spokesperson said, “The allegations that Virgin Atlantic demands payment in US dollars is false. Our trade partners in Nigeria are extremely important to us and we work very closely with them, offering a range of fares available in Nigerian Naira. However, should our trade customers wish to pay via other currencies including the Great British Pound or US Dollar we are also able to accommodate this.”
Some of the foreign airlines flying in Nigeria are British Airways, Virgin Atlantic, Air France, KLM, Lufthansa Airlines, Turkish Airlines, Emirates Airlines, Qatar Airways, Etihad Airlines and Delta Airlines.
Others include Kenya Airways, Ethiopian Airlines, RwandAir, Egypt Air, Middle East Airlines, Africa World Airlines and South Africa Airways.
In 2006 when there was downturn in global oil prices and the CBN could not sell enough forex to foreign airlines to repatriate billions of naira in ticket sale proceeds, a number of foreign airlines were badly hit many of them resorting to the sale of ticket in dollars. The move was frown on by the CBN.