The Middle East and North Africa (MENA) face a significant hurdle with approximately $805 million (Dh2.95 billion) in funds currently blocked by regional countries, reveals the International Air Transport Association (IATA).
This issue of blocked funds poses a substantial challenge in the MENA region, affecting various sectors and hindering the smooth flow of financial transactions.
According to khaleejtimes.com, Data showed that Egypt has the highest amount of funds at $348 million followed by Algeria ($199 million), Lebanon ($154 million), Sudan ($30 million) and Yemen ($17 million).
“Block funds remain our big issue in the Mena region. We call on the Egypt government to work with the aviation industry to try to reduce this large block, which is the second largest globally. We have engaged and talks have been positive with the government,” said Kamil Alawadhi, vice-president for Africa and Middle East at the International Air Transport Association (Iata) during a virtual media briefing on Thursday.
He stressed that the airlines need cash to operate and cannot wait to settle their bills at the end of the month.
“In many cases, airlines settle their bills immediately and holding their cash restricts the airline’s ability to grow and operate safely. If multiple countries are holding airlines’ funds, then then it becomes an issue for the airlines. And I’m hoping that the government of Egypt, will proactively work with Iata to try to reduce the blocked funds and eventually have no blocked funds,” he said during the media briefing.
Iata earlier projected that Middle East airlines will report a $2.6 billion profit in 2023 and $3.1 billion in 2024. While per-passenger profit is likely to increase from $7.1 in 2022 to $11.2 in 2023 and $13.3 in 2024.
Iata officials said the Israel-Hamas war is not majorly affecting the region as a whole, but some countries individually.
SAF vs fuel
According to Iata, Sustainable Aviation Fuel (SAF) production volumes reached over 600 million litres in 2023, double the 300 million litres produced in 2022. In 2024 SAF production is expected to triple to 1.875 billion liters.
“SAF is roughly three times more expensive than aviation fuel. Logic would dictate that as SAF production increases, it’ll cost less to produce it and the price will go down. At some point, it’ll be cheaper than fuel,” said Kamil Alawadhi, adding that it will be difficult to say when SAF will be cheaper than fuel as it depends on increasing the production capacity of the eco-friendly fuel.
The global aviation body strongly opposed any form of national or regional environmental scheme that would result in more taxation of aviation emissions. “We have already agreed and committed to a target of net zero by 2050 as an industry. And double taxation would negatively affect the economy and harm aviation’s contribution to the economy. So we’re quite clear on that,” he said.
Main challenges in 2024
Alawadhi added that the biggest challenge for 2024 is the continuously high price of jet A1 fuel and the second is the supply of spare parts as aircraft are being utilised heavily due to growth in the aviation sector.
“This is actually beginning to become a problem for a lot of the airlines as you will find there are five or six airlines that have five or six aircraft on the ground waiting for spare engines, spare parts, and so on. These are the challenges most of the airlines in the region will be facing,” he added.