Kenya Airways has stated that three African countries are withholding $28 million of the airline’s revenue.
The countries are Nigeria, Malawi, and Ethiopia, according to a statement. The withheld funds limit the airline’s cash flow, making it challenging to operate amid rising operating costs.
The airline has demanded that the foreign states release these funds to it so that it may avoid any flight disruptions due to the lack of cash flow.
Kenya Airways is one of many airlines whose funds are being withheld by the state of Nigeria. Earlier this year, the nation claimed it was withholding more than $464 million in revenue from foreign airlines. Several airlines have taken legal action against the government.
The Kenya Airways’ Case
Kenya Airways has reported that three states across the African continent are withholding $28 million worth of its revenue. Malawi, Nigeria, and Ethiopia reportedly withhold millions from the Kenya-based carrier. The airline claims that these withheld funds are depleting its cash flow. If these funds are not released promptly, the airline will risk flight disruptions due to a lack of cash to cover operating costs. As operating costs rise, the airline’s margins shrink so long as it cannot produce adequate cash flow. The airline has addressed each nation individually, demanding that these funds be released.
The CEO of Kenya Airways, Allan Kilavuka, stated, “The blocked funds are mainly a cash impact as we are not able to access these funds. We are, of course, also concerned about the devaluation of these funds going forward,”Currently, we have approximately USD28 million blocked in mainly Nigeria, Ethiopia, and Malawi.”
Over $1 Billion Trapped in Africa
Across the African continent, various nations are reportedly withholding millions of dollars-worth of revenue from foreign airlines.
The International Air Transport Association (IATA) reports that there is over $1 billion in revenue due to foreign airlines being withheld across the African continent. Ethiopia fell near the top of the list but fell short of Nigeria by over $200 million until Nigeria recently released $265 million in withheld funds to the airlines.
Despite the recent release of funds, Nigeria still leads the pack in the race of withholding capital. The next closest competitions are Ethiopia, Zimbabwe, Eritrea, and Algeria. The four airlines withhold a total of $350 million from foreign airlines.
The state of Nigeria said that it needed to withhold the funds to stabilize its economy. It claimed that the funds were being used to keep ticket prices low and that its travel economy could collapse if it paid the airlines their earned revenue.
At the end of last month, Emirates reduced its flights to Lagos, citing that it could not continue its regular operations every week without receiving revenue. The airline demanded that Nigeria release the $85 million of its revenue.
The state has not paid this bill, leading Emirates to announce that beginning September 1st, all Emirates flights to and from Nigeria will be terminated until further notice. The airline refuses to fly without pay amid rising operating costs.
