Reports reaching Nairametrics suggest Nigeria’s largest travel agency, Wakanow may be facing financial challenges following an economic recession that has ravaged the aviation sector. Reliable sources also indicate that global industry regulator, IATA has threatened to yank Wakanow off their BSP program due to unpaid settlements.
Wakanow is a Private Company and does not make its Financial Statements Public.
According to accounts from sources with knowledge of the matter, Wakanow has found it difficult to meet its payment obligations under the Billing and Settlement Plan (BSP) used by the industry to settle ticket sales and remittances. Being the market leader, it is opined that their failure to meet payment obligations by the end of January may posse collateral damage to the industry as a whole.
Sources also reveal that bankers to Wakanow have taken action to secure their credit facilities to the company and are hesitant to extend further loans to the travel agency. The company is reportedly owing Zenith Bank millions, leading the bank to appoint a Chief Financial Officer (CFO) for Wakanow, part of its plans to safeguard its finances.
Zenith Bank often appoints CFO’s for its obligors if there are reasonable grounds to believe that the management of its obligors are mishandling finances or if they face internal challenges that might affect their ability to meet up with loan repayments. It is understood that the accounts department of the company is more or less manned by employees loyal to Zenith Bank.
Nairametrics reached out to Wakanow to verify some of these claims but did not get a denial or affirmation. In an email sent to the writer, the company stated that
“As Africa’s largest online travel company, we have continued to enjoy a robust relationship with our financial partners, airlines, hotels and relevant regulatory bodies, including IATA. We are currently working with IATA to de-risk the remittance process to airlines so we can offer cheaper tickets to the Nigerian and African travel market.”
Wakanow also revealed that it had revamped is business model
“We recently revamped our business model in response to our commitment to continuously offer the most affordable travel solutions to our customers. We believe our new model will offer even more value and cheaper travel deals to our customers, and would enable us address such issues as refunds within the shortest possible time. “
The company neither addressed the alleged financial challenges or whether it was seeking to raise funds anytime soon. However, it did suggest that it was working hard to address issues around refunds to its customers. Several customers on social media have complained about not receiving bookings on time despite payment. After a long delay, they are then made to pay an additional sum.
What could have led to this ?
According to industry sources, Wakanow may have been the unfortunate victim of the country’s economic crisis last year.The recession in the economy last year and devaluation of the Naira led to many Nigerians either losing their jobs or having to scale down on luxuries. Travel outside the country for many Nigerians is a luxury and travelers cut back on holiday trips abroad.
Airlines operators and travel agents also had difficulty sourcing forex to repatriate ticket sales leading to an increase in ticket prices as a measure to hedge against rising foreign currency risk. Wakanow being the largest travel agent is said to have issued a lot of tickets mostly on credit and at relatively low prices as part of its drive to increase sales. However, this move may have backfired as corporates who transact with the company still owe it millions of naira in unpaid ticket sales.
Devaluation of the Naira?
The devaluation of the Naira against the dollar last year may have put the company under some strain, as it was reluctant to pass on the full cost to customers. Tickets to popular destinations became twice as expensive even though Wakanow is known to offer some of the cheapest deals around. Operators in the aviation industry found it difficult accessing foreign exchange to repatriate their profits and were forced to increase their charges in Naira.
It is also alleged that Wakanow ran a large operations with workforce of around 700 people across the country, Africa, Dubai and in Europe. Sources also allege that a staff re-organisation was recently carried out and may have resulted in downsizing. The company also recently converted some of its retail outlets into Agency arrangements as part of its move to reduce overheads.
Wakanow received a $20 million investment from African Capital Alliance (ACA) a private equity firm in 2014. The firm reportedly spent a huge amount of money marketing in an industry with very thin margin and a small market.
It also devoted significant resources on developing regional tourism and creating resorts around the country. The recession and ensuing economic crisis, threw a spanner in the works.
A dated Pitch document cited by Nairametrics reveals that as at 2013 the company was making over $55 million in ticket sales, 90% of which belongs to Airline operators and other stakeholders. Just last year, it opened Wakanow UK and reported that it had about 10% of the market share that said to be worth about N100 billion as at 2015.
The company planned to list on the NASDAQ this year but may have to push that plan aside as it battles survival. Reports also indicates that it is in discussion with potential acquirers, possible an unnamed South African travel company. The deal may help provide the liquidity required to keep the company afloat and able to achieve its potentials.
Wakanow was founded in 2008, and is Nigeria’s first Online Travel Agent. The company has since expanded to the United Arab Emirates UAE, Ghana, United Kingdom and the United States. The company bought online bus ticketing start-up Oya.com.ng in 2015.