Fresh data on blocked airline funds totalling $1bn come at a time when the industry is reeling under the impact of Covid-19 pandemic.
Some 20 countries have reportedly blocked $1bn in airline funds from the sale of tickets, cargo space, and other activities, according to the International Air Transport Association (IATA).
“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,” Willie Walsh, IATA’s director general said recently.
Airlines, he said 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,” Walsh noted.
Approximately $963mn in airline funds is being blocked from repatriation in nearly 20 countries. Four countries- Bangladesh ($146.1mn), Lebanon ($175.5mn), Nigeria ($143.8mn), and Zimbabwe ($142.7mn), account for over 60% of this total, although IATA noted there has been “positive progress” in reducing blocked funds in Bangladesh and Zimbabwe, of late.
The industry has to tackle the issue of blocked funds at a time when it is facing an unprecedented crisis. IATA expects net airline industry losses of $47.7bn in 2021 (net profit margin of -10.4%). This, however, is an improvement on the estimated net industry loss of $126.4bn in 2020 (net profit margin of -33.9%).
Despite an estimated 2.4bn people travelling by air in 2021, airlines will still burn through a further $81bn of cash.
Obviously, the crisis is longer and deeper than anyone could have expected. Losses will be reduced from 2020, but the pain of the crisis seems increasing.
There is optimism in domestic markets where aviation’s hallmark resilience is demonstrated by rebounds in markets without internal travel restrictions.
Government-imposed travel restrictions, however, continue to dampen the strong underlying demand for international travel.
“We encourage governments to work with the 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.
As countries shut their borders to protect their citizens from the pandemic, global tourism has come to a grinding halt. This has hugely impacted the entire tourism ecosystem, resulting in a significant drop of movement and occupancy in the airline and hospitality industries.
Obviously, this has forced the airline industry to conserve the much-needed cash.
A recent analysis showed that the airline industry cannot slash costs sufficiently to neutralise severe cash burn to avoid bankruptcies and preserve jobs in 2021.
IATA has reiterated its call for government relief measures to sustain airlines financially and avoid massive employment terminations.
Recovery has been delayed owing to the new Covid-19 outbreaks mainly due to the Delta variant, and government mandated travel restrictions including border closings and quarantine measures.
This being the reality, there is no justification for blocking airline funds by government, anywhere.
Therefore, governments must take firm action to avert the airline industry’s impending economic and labour catastrophe. They must step forward with additional financial relief measures besides releasing blocked funds.
The writing is clearly on the wall. If we do nothing about it, we shall only have ourselves to blame.
For each day that the crisis continues, the potential for job losses and economic devastation grows. Moreover, the loss of aviation connectivity will have a dramatic impact on the global GDP, threatening $1.8tn in economic activity.
Pratap John is Business Editor at Gulf Times. Twitter handle: @PratapJohn
Some 20 countries have reportedly blocked $1bn in airline funds from the sale of tickets, cargo space, and other activities, according to the International Air Transport Association (IATA).
“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,” Willie Walsh, IATA’s director general said recently.
Airlines, he said 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,” Walsh noted.
Approximately $963mn in airline funds is being blocked from repatriation in nearly 20 countries. Four countries- Bangladesh ($146.1mn), Lebanon ($175.5mn), Nigeria ($143.8mn), and Zimbabwe ($142.7mn), account for over 60% of this total, although IATA noted there has been “positive progress” in reducing blocked funds in Bangladesh and Zimbabwe, of late.
The industry has to tackle the issue of blocked funds at a time when it is facing an unprecedented crisis. IATA expects net airline industry losses of $47.7bn in 2021 (net profit margin of -10.4%). This, however, is an improvement on the estimated net industry loss of $126.4bn in 2020 (net profit margin of -33.9%).
Despite an estimated 2.4bn people travelling by air in 2021, airlines will still burn through a further $81bn of cash.
Obviously, the crisis is longer and deeper than anyone could have expected. Losses will be reduced from 2020, but the pain of the crisis seems increasing.
There is optimism in domestic markets where aviation’s hallmark resilience is demonstrated by rebounds in markets without internal travel restrictions.
Government-imposed travel restrictions, however, continue to dampen the strong underlying demand for international travel.
“We encourage governments to work with the 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.
As countries shut their borders to protect their citizens from the pandemic, global tourism has come to a grinding halt. This has hugely impacted the entire tourism ecosystem, resulting in a significant drop of movement and occupancy in the airline and hospitality industries.
Obviously, this has forced the airline industry to conserve the much-needed cash.
A recent analysis showed that the airline industry cannot slash costs sufficiently to neutralise severe cash burn to avoid bankruptcies and preserve jobs in 2021.
IATA has reiterated its call for government relief measures to sustain airlines financially and avoid massive employment terminations.
Recovery has been delayed owing to the new Covid-19 outbreaks mainly due to the Delta variant, and government mandated travel restrictions including border closings and quarantine measures.
This being the reality, there is no justification for blocking airline funds by government, anywhere.
Therefore, governments must take firm action to avert the airline industry’s impending economic and labour catastrophe. They must step forward with additional financial relief measures besides releasing blocked funds.
The writing is clearly on the wall. If we do nothing about it, we shall only have ourselves to blame.
For each day that the crisis continues, the potential for job losses and economic devastation grows. Moreover, the loss of aviation connectivity will have a dramatic impact on the global GDP, threatening $1.8tn in economic activity.
Pratap John is Business Editor at Gulf Times. Twitter handle: @PratapJohn
