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$600m trapped funds: Foreign airlines shut inventory to travel agents as Job losses climb

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Travel agencies have been shutting down operations in Nigeria over the last six months due to the challenge of trapped funds.

Also, some of the travel agencies have reduced their number of staff within the period as some of the airlines, especially European, American, and the Middle East, including Ethiopian Airlines from Africa have shut their Global Distribution Systems (GDS) against the travel agencies.

The shutting down of the GDS automatically stops travel agents who are regarded as travel partners to airlines from booking flights for their clients through the platform.

The travel agents get some commission for each booking made for air travellers through the airlines’ GDS. The commission varies from one airline to another.

When Nairametrics visited one of the major travel agents in Lagos over the weekend, it was a hopeless situation. All the staff, including the chief executive officer (CEO) of the company, wore a forlorn look. There is no hope in sight.

The agency, which used to be a beehive of activities, was almost a ghost yard. The number of staff had reduced drastically by over 30%, while a few staff that were on duty only tapped on the mouse and laptops sitting on white tables in front of them aimlessly.

The travel agency, like others, no longer has access to many of the foreign airlines’ GDS. Airlines like Delta, Air France/KLM, Emirates, British Airways, Virgin Atlantic, Lufthansa, Turkish, and Qatar among others have closed down their GDS against the travel agency because of the unpleasant situation of trapped funds.

What this means

The implication of this is that travel agencies will no longer be able to sell air tickets to their willing clients, while passengers are compelled to buy tickets at the black-market rate of N730 to a dollar to purchase air tickets.

The bulk of commissions of travel agencies is earned from foreign airlines. The situation since January has further compounded their challenges as bills continue to rise, yet no resource is earned.

The CEO of the travel agency (names withheld) in interaction with Nairametrics painted a gloomy picture of the whole scenario.

The company, with its headquarters in Lagos Island, said all efforts by the umbrella body of travel agencies in Nigeria, the National Association of Nigeria Travel Agencies (NANTA) to intervene in the last three months have proved abortive.

He said almost two months after the federal government directed the Central Bank of Nigeria (CBN) to release $265 million, representing 50% of the trapped funds, the situation was yet to abate.

The CEO said air traffic had dropped on international routes in Nigeria, while the airlines have continued to squeeze the travel agencies out of business through their antics.

The helmsman also said most of their clients, especially those who have their children in Europe and America for education purposes, have begun their withdrawal and moved to institutions in West Africa in order to save the cost of airfares.

He said: “Most of the travel agencies are closing shop because they can’t pay their staff. They don’t even have the funds again. Most of their clients can no longer buy dollars. Some of them are even returning their children to African countries, including Togo and the Benin Republic. That money they would have paid to buy tickets for their children is enough to put them in schools in Ghana, Benin, and other countries within the continent.

“So, that has affected the travel agencies tremendously and most of them are crying daily. Their accounts are in red and they are at the Save-Our-Soul (SOS) level now. NANTA too is not folding its arms, but it can’t embark on any action without the support of the majority of its members.

What NANTA should do

“NANTA will react officially to all this nonsense the airlines are doing. The leadership is under pressure. The airlines have not been fair to the agencies at all in this case. They are suffocating the people who are also their trade partners, which does not seem to be right. This challenge is not peculiar to Nigeria alone. Why are the airlines not reacting the same way in other countries? This is where they can even feed their aircraft and go.”

Besides, a top staff with one of the leading airlines in Africa said the airline was yet to get any amount of money from its trapped funds in Nigeria since January.

According to him, the airline had over $160 million as trapped funds in the country, while efforts by the carrier to recover the sum had failed despite the involvement of the International Air Transport Association (IATA).

He, however, said unlike some of the foreign airlines that removed the travel agencies from their GDS, the airline refused to do so because of the consequence on the travel agencies and the effect on the traveling public.

He also insisted that the carrier would not stop the Nigerian routes, but appealed to the federal government to intervene in the situation to prevent a total collapse of the industry.

To curb the crisis, he said the airline now pays for some services in naira, rather than dollars.

“We now pay for fueling and some other charges in naira, but there are some critical ones that have to be paid in dollars and we have a lot of money stuck in Nigeria.

“The money is in the hands of the CBN, we are not earning interest on it, yet we can’t get it. The airlines are losing big time,” he said.

What you should know

  • Just last month, NANTA described as exploitative the current foreign airline’s airfare of over N3 million for economy class tickets.
  • President of NANTA, Mrs. Susan Akporiaye at a news conference in Lagos had said an economy flight ticket of N300,000 now sells for N1.5 million, while another N1 million is charged for change of travel dates.
  • Executive members of the NANTA who were part of the news conference expressed disappointment with the action taken by foreign airlines to frustrate Nigerian passengers and destroy their businesses.
  • They said the foreign airlines have no right to capitalise on their trapped funds to exploit the market in the name of protecting their business.
  • Akporiaye, while appreciating the response to the release of some funds, urged the government to, as a matter of urgency, open further windows of engagement by calling a meeting with all parties.
  • Akporiaye stated that the foreign airlines were unhappy because they were paid short of the 25% of the trapped funds released while others were yet to get their money.
  • She emphasised that there were transparency and trust issues in the matter.
    “This now is creating trust issues with the airlines; there is no transparency and so the airlines are not confident that we really mean to pay them this money, hence the reason why they are still holding forth and they are still watching to see how it goes,” she said.

The post $600m trapped funds: Foreign airlines shut inventory to travel agents as Job losses climb appeared first on Nairametrics.

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