Blocked Airline Funds: IATA has had enough!

Aviation in Africa is on the rise, at least in some of the continent’s 54 countries. However, the willingness of some governments to release withheld funds by returning them to their proprietors, passenger and cargo airlines, is in decline. If they do not change this practice, they risk being isolated from intercontinental air traffic. The International Air Transport Association (IATA) has now issued a warning about this problem and its possible consequences. It remains to be seen whether those affected will heed this alert and change their policy.

Algeria tops the list of countries that are permanently blocking airline funds. The country owes USD 307 million to foreign passenger and air cargo companies operating there. These are funds from local ticket sales or booked and paid air cargo shipments, but to which the airlines concerned have no access due to a repatriation blockade proclaimed by the aviation authority of the country. Blocked funds are revenues earned by international airlines in local currencies that cannot be converted and repatriated in U.S. dollars due to government-imposed restrictions or foreign exchange shortages. But how does this happen and what measures are needed to release blocked funds?

Complex scheme
Internationally operating airlines have a unique business structure. They earn revenue in many countries, but most of their major costs are incurred at their home airports – maintenance, manpower costs, fuel, expenditures for ground equipment or office buildings.

This very complex scheme can only function when airlines are able to repatriate the funds earned from sales outside their home turf. It ensures that carriers can pay their bills and keep operations running permanently, safely and reliably. Binding agreements between airlines and national aviation authorities or government bodies are supposed to guarantee this. However, as the table shows, this is often not the case. As of OCT25, airlines had a staggering USD 1.2 billion in blocked funds globally, claims IATA. Timely repatriation in U.S. dollars is essential for airlines to meet dollar-denominated expenses like leasing, maintenance, fuel, and salaries.

Blocked funds block airline development
Should funds remain trapped, airlines are exposed to currency depreciation. If a local currency loses 20% of its value during the delay, the airline suffers a direct financial loss when converting it back to dollars. At the same time, carriers often borrow to cover operational expenses while waiting for blocked funds to be released, and rising interest rates can add hundreds of thousands in unplanned costs. Or there could be opportunity cost: capital tied up in blocked funds cannot be invested in fleet upgrades, route expansion, or sustainability initiatives, torpedoing growth and reducing competitiveness.

Consequently, airlines must factor this risk into their network and financial planning, particularly if serving financially strapped African countries. Trapped funds often lead to reduced flight frequencies, higher fares, or even the suspension of routes altogether. In effect, unlawfully withheld proceeds make a country more expensive and less attractive to foreign carriers.

Loss of trust
Thomas Reynaert, IATA Senior Vice President, External Affairs, warns of another consequence of this obstructionist attitude: loss of trust. “The longer funds remain trapped, the greater the damage to confidence. International airlines and investors see blocked funds as a warning sign of financial instability. Currency controls, while sometimes necessary during crises, can tarnish a country’s reputation and strain relationships with global institutions, making recovery harder and slower.”

The problem is serious, but there is light at the end of the tunnel, says IATA official Reynaert. “With political will, open dialogue, and a commitment to transparency, governments can resolve blocked fund challenges in ways that support economic and aviation growth.”

Nigeria is an encouraging example
Prioritizing aviation in foreign exchange allocation is the first step toward clearing blocked funds. From there, authorities can streamline administrative processes and eliminate unnecessary bureaucratic hurdles that slow repatriation. Experience shows that, with the right approach, blocked funds can be released without destabilizing local economies.

Nigeria offers a clear example: through constructive engagement and phased repatriation, the backlog was successfully cleared. At one stage, the government withheld funds amounting to staggering USD 850 million. However, through constructive dialogues and phased payback, the backlog was successfully cleared.

IATA’s list of the largest 10 debtors***
***The XAF Zone includes Cameroon, Central African Republic, Chad, Republic of the Congo, Equatorial Guinea, Gabon.