Battered Airlines Owed Billions as Governments Withhold Cash
(Bloomberg) -- Airlines are owed almost $1 billion across 20 countries as governments seek to hang on to hard currency, depriving the industry of vital cash at a time when travel has been devastated by the coronavirus crisis.
Figures published by the International Air Transport Association show that Venezuela is withholding a further $4 billion that’s been outstanding for years and may be permanently lost to carriers.
Lebanon, Bangladesh, Nigeria and Zimbabwe are the worst offenders among other states, accounting for 60% of the $963 million deficit, according to IATA. While the total is down on previous years, it is higher as a proportion of overall sales after the pandemic limited flying.
“Airlines will not be able to provide reliable connectivity if they cannot rely on local revenues to support operations,” IATA Director General Willie Walsh said in a statement. “Now is not the time to score an own goal by putting vital air connectivity at risk.”
While blocked remittances have dogged aviation for years, they emerged as a major issue in 2013 when Venezuela tightened currency controls, leading several carriers to terminate or reduce flights there. Angola owed almost $500 million in 2018 amid a persistent shortage of foreign-currency reserves, before IATA negotiated a release of funds.
The current issues in Lebanon, which owes $176 million, emerged with an economic crisis that began in 2019 and has been compounded by the Covid-19 outbreak and a deadly explosion that ripped through Beirut last summer.
IATA says there has been progress in reducing blocked funds in Bangladesh and Zimbabwe, which each owe airlines around $145 million. That’s about the same as the amount outstanding in Nigeria, a country that cleared a previous deficit in 2018 before the shortfall built up again last year due to the virus and an associated oil-price crash.
The airline trade group said it no longer includes the Venezuela shortfall in its tracking.
©2021 Bloomberg L.P.