The African Airlines Association (AFRAA) has requested the intervention of the African Union (AU) in persuading the Angolan government to release airlines’ blocked sales proceeds in that country.
Following the decline of oil prices in 2014 oil-exporting African countries faced a foreign currency crunch that led to difficulties in repatriating foreign airlines’ sales revenue. The countries seriously affected include Nigeria, Angola and Sudan, which had already seen a precipitous decline in oil revenue after the secession of South Sudan—where most of the oil fields lay—in July 2011. Meanwhile, the negative effect on tourism caused by the Arab Spring and terrorist attacks took its toll on Egypt’s ability to repatriate funds. Most recently, central bank policy in Algeria has exacerbated that country’s inability to repatriate foreign revenues.
The lack of foreign currency has caused the local currency to depreciate rapidly in some of the countries, resulting in the creation of a parallel exchange rate and eroding the value of sales in the affected states.
According to the International Air Transport Association (IATA), blocked funds in Angola, which stood at $326 million in February, surged to $477 million in June. During the same period Nigeria reduced its total of blocked funds from $259 million to $171 million and Sudan from $227 million to $190 million, while Egypt completely cleared the $149 million it owed to foreign carriers. Algeria’s blocked funds stood at $146 million.
“AFRAA wishes to bring to your attention the critical situation in Angola being faced by airlines with regards to continued delays and difficulty in repatriation of their sales revenues from the country,” the association said in a letter to African Union Infrastructure and Energy Commissioner Amani Abu-Zeid.
According to AFRAA, engagement with the Angolan authorities in 2016 resulted in periodic allocations to airlines that later stopped. In view of the now acute situation, which adversely affects the operations of at least six airlines, the AFRAA Secretariat took part in a delegation including IATA and the Airline Association of Southern Africa (AASA) that met the Angolan minister of transport, the deputy governor of the country’s Reserve Bank and its secretary of state for Treasury in June. The meeting with the Angolan authorities did not produce tangible solutions, although the Algerian government invited the delegation to send a proposal for its consideration.
AFRAA has now called upon the African Union Commission to impress upon Angola to include airlines among its top priorities in foreign exchange allocation and to increase the allocations to the airlines so that they can repatriate their sales as necessary every month. “Considering the current critical viability challenges that most African airlines are facing, your urgent intervention in the matter is highly appreciated,” AFRAA said.
Having large amounts of blocked funds continues to effect the cash flows of airlines that fly to countries such as Angola, including EgyptAir, Ethiopian Airlines, Kenya Airways, Royal Air Maroc, RwandAir and South African Airways.
AFRAA secretary general Elijah Chingosho told AIN that the association has decided to write to the chairperson of the AU Commission for a meeting with the CEOs of the major airlines affected. “We await their response,” he said. “We want to escalate the issue to the head of state of Angola given the seriousness of the issue.”
Ethiopian Airlines Group CEO Tewolde Gebremariam told AIN that his airline managed to secure its blocked funds from Nigeria and Egypt. Gebremariam said $100 million of his airline’s revenues remain stranded in Angola and $25 million in Sudan. “The biggest problem we now have is in Angola,” he noted.
Emirates last month announced it would scale down its operations to Angola’s capital, Luanda, due to the difficulty in repatriating sales revenue. The Gulf airline also terminated a 2014 deal with Angolan airline TAAG, under which Emirates took operational control of the airline for 10 years and the two cooperated on commercial opportunities on the continent.