British Airways, Delta to reap from United Airline’s exit

2016-05-30--07_17_46

Trapped funds: BA – $100m, Iberia – $5m, Air France/KLM – $150m

United States-based airline, Delta, and British mega car-rier, British Airways (BA), are poised to reap from the sudden withdrawal of United Airline’s service from the lucrative US-Nigerian route. This is coming at a time some of the carriers have given a breakdown of their funds trapped in the country.

The total of BA’s trapped funds is $100 million as at March 2016, while Iberia had $5 million of its funds trapped before the airline ceased operations penultimate month to Nigeria.Sources said both Delta and United’s funds are in the region of $180 million.

Those of Air France-KLM are estimated to be over $150 million.Shortly after the America’s flag carrier announced its stoppage of service on the route, scores of travellers quickly switched to Delta and British Airways; with flights fully booked on Houston, Texas, till September 2016.

United has Houston as its hub; a very high destination for Nigerians, coupled with its strategic location for operators in the oil and gas industry. The situation leaves Delta as the sole operator of the US-Lagos route. Both United and Delta operate to Nigeria under the Nigeria-US ‘Open Skies’ agreement.

Arik is the only airline from Nigeria that is reciprocating the pact. An insider in the airline industry explained that BA is the biggest beneficiary of the action of United as the British carrier is a strong operator to Houston and has more than two flights daily from London.

United Airlines had, last week, announced that it would stop flying to Nigeria next month, ending operations on its only African route because of weakness in the energy sector and difficulties in repatriating money from tickets sold in the country.

This came barely six weeks after Spain’s national carrier, Iberia Plc., stopped flights to Nigeria, citing dwindling passenger traffic as the reason. United Airlines said in a note to employees on Wednesday that the daily route from Houston to Lagos had underachieved for years, but was kept alive because of its importance to Texas-based customers. According to the carrier, the last flight will be on June 30, after which Delta Air Lines will be the only major US carrier flying to Africa.

Highlighting the reason for the US carrier’s exit from Nigeria, United Airlines’ spokesman, Jonathan Guerin, told Bloomberg, “Repatriation has been a significant issue, as has been the downturn in the energy sector.”

The Central Bank of Nigeria’s foreign exchange policy has restricted the movement of foreign currencies abroad after the global slump in oil prices depleted the country’s foreign reserves.

The Area Manager, South West Africa, International Air Transport Association (IATA), Dr. Samson Fatokun had, at a recent forum by the body, disclosed that IATA had visited the Nigerian government to express concern over the trapped funds and what the government was doing to get them released.

The CBN had, in recent times, been reluctant to give the airlines the dollar equivalent of their naira ticket sales at the official rate as the CBN seeks to conserve its fast dwindling external reserves for only what it considers essential imports or payments by Nigerians.

The result is that many international airlines have built mountains of naira cash, which they cannot take back to their countries. A top official of BA, who spoke to New Telegraph from London, said that booking on its flights from Lagos to Houston has doubled since the announcement, adding that passengers from Lagos- London-Houston are finding it ‘extremely difficult’ to get seats until September.

“Flights are fully booked which is very unusual,” he said. The source disclosed that the carrier could restore its super jumbo jet B747-400 airplane that was withdrawn when capacity shrunk on the London- Lagos route back on the route.

Stakeholders were stunned with the sensational stoppage of operations of the American airline, saying the action came at a time the Federal Government was on the verge of resolving issues that led to the repatriation of foreign airlines’ fund trapped in the country.

A former Assistant Secretary-General of Airline Operators of Nigeria (AON), Mohammed Tukur, stated that United’s business model was attached to the oil and gas traffic, stressing that since the sector is no longer thriving both in Nigeria and globally, it was bound to affect its operations as less people now travel to Houston from Nigeria.

Meanwhile, British Airways has refuted media reports that it plans to stop operations to Nigeria over its $100 million trapped in the country. The airline, in a statement yesterday, said it has a long history in Nigeria, having begun operations in the country 80 years ago as Imperial Airways. It said Nigeria remained a strategic market for the airline, adding that its operations locally are very strong.

According to the airline, “We have not issued any statements at any time indicating that we are on the verge of terminating operations in the country. We will continue daily operations into both Abuja and Lagos.”

Source: New Telegraph

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