International airlines increase ticket prices to N770/$1, up from N663/$1

The International Air Transport Association (IATA) has set the exchange rate for ticket sales in Nigeria at N770/$1, which is higher than the current official exchange rate of N461.06/$1. This has raised concerns that international airfares, especially on Nigerian routes, may skyrocket once again.

The inability of international airlines to repatriate their ticket sales for over a year has also contributed to the high airfares on Nigerian routes. This is because airlines are unable to access the foreign exchange they need to pay for fuel and other expenses.

The average price of a six-hour flight on the economy ticket has increased from N400,000 in 2021 to about N1.2 million in 2022 and 2023. Business class tickets have also increased significantly, with prices ranging from N4 million to N6 million.

The increase in the exchange rate for ticket sales and the inability of airlines to repatriate their ticket sales are likely to lead to a significant increase in international airfares on Nigerian routes. This is likely to make it more difficult for people to travel internationally, especially those who are on a budget.

The implications of the adjustment by IATA

With the new benchmark, an N1.2 million economy ticket may rise to N2 million and above, while for the business class, the fares may rise to N7 million or more.

As of 2021, a dollar was being accessed at the official rate of N444 for one dollar by airlines. But it jumped to over N577 a dollar in 2022.

With the new regime and the harmonisation of the exchange rate by the new administration, a dollar was sold at the black market on Tuesday at N702. 

How Nigerian airlines are reacting to this development

A source close to one of the foreign airlines operating in Nigeria confided in our correspondent on Tuesday that the new regime of N770 to one dollar would kickstart today.

According to the source, IATA had already informed its member airlines of the new benchmark. The source said: “Please, be informed that the IATA Rate of Exchange (IRoE) will increase from tomorrow (today).”

What you should know

The International Air Transport Association (IATA) represents about 300 airlines in 120 countries, and about 25 of its members operate direct commercial and cargo flights into Nigeria. IATA has not yet responded to a request from Nairametrics to confirm the new exchange rate for ticket sales in Nigeria.

At the end of April, IATA said that the blocked funds of its member airlines in Nigeria had increased to $818.2 million, up from $744 million in March. This makes Nigeria the country with the most trapped funds in the world.

The total amount of blocked funds in the world is $2.27 billion, as of April 2023. Apart from Nigeria, other countries with significant amounts of blocked funds are Bangladesh ($214.1 million), Algeria ($196.3 million), Pakistan ($188.2 million), Lebanon ($141.2 million), and India ($126.9 million).

IATA’s Director-General, Willie Walsh, warned that the rapidly rising levels of blocked funds are a threat to airline connectivity in the affected markets. He said that airlines could not continue to offer flight services in countries where they have found it difficult to repatriate their funds and called for quick action to address the situation.

Walsh also said that the blocked funds are a major disincentive for airlines to invest in new routes and services in the affected markets. He said that this could lead to a decrease in air connectivity and higher fares for passengers.

IATA urged governments to take steps to address the issue of blocked funds. Walsh said that this could include providing airlines with access to foreign exchange, simplifying the process for repatriating funds, and providing legal certainty for airlines.

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