Fallout of Russian invasion of Ukraine spreads to global aviation industry

The fallout of Russia’s invasion of Ukraine has spread to the global aviation industry with two more European countries banning Russian carriers and the European Union saying it would restrict the exports of aircraft parts.

Virgin Atlantic and British Airways have begun routing flights around Russian airspace following Britain and Russia banning each other’s airlines in tit-for-tat retaliation over Ukraine.

The Czech Republic and Poland have said, they will ban Russian airlines from their airspace.

Aviation industry leaders have said they were prepared for further bans in spite of increased costs over mutual overflight rights.

Russia’s invasion has “significant potential to derail the fragile airline recovery in Europe,” said Rob Morris, chief consultant at UK-based Ascend by Cirium.

While many airlines are still using Russia’s east-west transit corridors, some have begun asking about capacity in Anchorage, harking back to Alaska’s Cold War use as a refuelling hub for jets barred from Soviet airspace.

Lessors, manufacturers and western airlines, have assessed the growing risks of doing business with Russia with sanctions targeting Russian companies, banks and individuals.

In a statement Delta Air Lines said, it was suspending a codesharing service with Russia’s Aeroflot.

“It will be more difficult for investors to accept portfolios of aircraft assets containing Russian airlines. Nobody wants to take Russian risk today,” said aviation adviser Bertrand Grabowski while adding fears includes a lack of insurance coverage.

On Thursday, Japan Airlines cancelled a flight to Moscow, citing potential safety risks. Britain has also closed its airspace to Russian airlines as part of its punitive measures.

Moscow has responded by barring British airlines from landing at its airports or crossing its airspace, citing “unfriendly decisions” by London.

Virgin Atlantic said, avoiding Russian airspace would add 15 minutes to an hour to its flights between Britain and India and Pakistan.

Emirates said it had made minor routing adjustments leading to slightly longer flight durations.

United Parcel Service Inc said it was implementing contingency plans.

“Russia are unlikely to initiate their own sanctions and airspace bans as they would not wish to see Aeroflot receive reciprocal bans,” said OPSGROUP an aviation industry cooperative that shares information on flight risks. “However, they may react in response to sanctions from other states.”

Airlines now face a rise in oil prices which has soared to more than $105 a barrel for the first time since 2014. This rise in operating costs at a time when demand for travel remains low because of the pandemic.

According to rating agency Fitch, the profit of airlines and their cashflows could suffer if crude oil prices continued to rise or stayed high.

According to Jefferies, European airlines were likely to take a longer-term hit in light of the conflict.

Russian airlines have 980 jets in service, of which 777 are leased, according to analytics firm Cirium.

Of these, 515 with an estimated market value of $10 billion are rented from abroad.

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