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Airline industry shifts attention to Russia risks after Ukraine closure

Randy Mancini 6 Feb 24
A passenger plane approaches Ted Stevens Anchorage International Airport on a cold and clear day in Achorage Alaska
FILE PHOTO: A passenger plane approaches Ted Stevens Anchorage International Airport on a cold and clear day in Achorage, Alaska, November 8, 2011. REUTERS/Nathaniel Wilder

February 25, 2022

By Jamie Freed and Allison Lampert

(Reuters) – Alaska’s Anchorage Airport said airlines have started making inquiries about capacity in case routes over Russia are impacted due to the Ukraine crisis, in a sign of the conflict’s growing fallout for the global aviation industry.

The airport was a popular refuelling hub for long-haul flights during the Cold War, when Western airlines were unable to access Russian airspace on routes from Europe to Asia.

Japan Airlines cancelled its Thursday evening flight to Moscow, citing potential safety risks, while Britain closed its airspace to Russian airlines, including Aeroflot, as the conflict’s impact on the industry widened beyond Ukraine to Russia.

Ukrainian forces on Thursday were battling Russian invaders on three sides after Moscow unleashed the biggest attack on a European state since World War Two.

Airspace in Ukraine, Moldova, parts of Belarus and in southern Russia near the Ukraine border was closed as a result, giving airlines a narrower range of routing options.

Emirates said it had made minor routing changes to Stockholm, Moscow, St. Petersburg and some U.S. flights that were hit by the airspace closings, leading to slightly longer flight times.

OPSGROUP, an aviation industry cooperative that shares information on flight risks, said any aircraft travelling through Russian airspace should have contingency plans in place for closed airspace due to risks or sanctions.

“Russia are unlikely to initiate their own sanctions and airspace bans as they would not wish to see Aeroflot receive reciprocal bans,” OPSGROUP said. “However, they may react in response to sanctions from other states.”

The governing council of the International Civil Aviation Organization (ICAO), a U.N. body, will discuss the Ukraine conflict at a meeting on Friday, a spokesperson said.

Germany’s Lufthansa said on Thursday it saw no need to cancel flights to Moscow.

As airlines assessed the airspace risks, they have also been hit by a spike in oil prices to more than $105 per barrel for the first time since 2014 as a result of the conflict. That raises operating costs at a time when travel demand remains low because of the pandemic.

Jefferies analysts said European airlines were also likely to take a longer-term hit to demand in light of the conflict, pointing to a 27% fall in travel from the European Union to Ukraine and Russia over the span of two years after Russia annexed Crimea in 2014.

Aviation bosses are also worried about the impact on dealings with Russian companies. Sanctions could disrupt payments to leasing firms.

Russian companies have 980 passenger jets in service, of which 777 are leased, according to analytics firm Cirium. Of these, two thirds, or 515 jets, with an estimated market value of about $10 billion, are rented from foreign firms.

Russia’s domestic market has been among the best performers globally during the pandemic, with capacity down only 7.5% this week compared to the same week in 2020, according to travel data firm OAG.

(Reporting by Jamie Freed in Sydney and Allison Lampert in Montreal; additional reporting by Maki Shiraki in Tokyo, Guy Falconbridge in London, Alexander Cornwell in Dubai and Tim Hepher in Paris. Editing by Gerry Doyle)