Airlines will reconsider operations in countries where they cannot repatriate earnings, IATA DIrector General Willie Walsh has said.
In previous years Mr Walsh has identified Venezuela as a particular offendor in the blocking of funds, although no country was named on this occasion. The situation regarding blocked funds has improved but still presents a considerable concern for airlines’ profitability.
Speaking sat the IATA Congress in Delhi about the challenges posed by blocked funds for the airline industry. Mr Walsh pointed out that governments must recognise the risks to their economies and citizens if airlines withdraw services due to blocked funds.
He noted the industry’s net margin is only 3.7pc, making the issue of trapped funds critical for financial performance.
Willie Walsh shared: “Blocking of funds is a really challenging issue for the industry because for airlines, when you look at the financial performance of the industry with a net margin of 3.7pc, we cannot afford to have funds trapped in countries where airlines are continuing to provide services. What we do is we highlight to governments the risks associated with blocking funds because it’s clear that an airline will not continue to operate into a country if it cannot repatriate its money because in effect it means they’re operating there for free. The amount of money blocked is down on where it was, but it’s still a significant sum of money for an industry making such small margins. I think the critical issue is that governments understand the risk that they’re facing, that they, their economies and their consumers are facing if funds get blocked because ultimately it leads to a reduction or withdrawal of services and that clearly is going to be damaging to the economy and damaging to the citizens of the country if that were to happen.”
