Restrictions Now; Repercussions Ahead

The turbulence for the aviation industry seems to be in a continuum. Just as the sky was beginning to get clear after the halt that the COVID-19 pandemic caused, another crisis has emerged. The invasion of Ukraine by Russia is again embarking uncertainty towards the aviation industry with deeper impacts that may push recovery back again.

The invasion followed by sanctions across the globe pose a threat to the already vulnerable aviation industry. Extensive economic instability, uncertain demand for air travel, airspace restrictions, and other issues are likely to cloud over the aviation industry as the crisis continues. Closed or restricted airspace is a major concern that comes with multiple other related issues. According to flight tracking websites, the airspace over Ukraine and its border with Russia has mostly been empty. A Notice to Air Missions (NOTAM) banning civil aircraft from flight routes bordering northeastern Ukraine was issued by Russia to remains in effect until May. Ukraine also closed its airspace for passenger flights. Civilian air traffic tracking sites also displayed airlines bypassing the conflict areas by a wide margin.

The Federal Aviation Administration (FAA) banned the United States (US) airlines and pilots from flying in areas of Eastern Europe. “The FAA issued NOTAMs expanding the area in Eastern Europe and Russia where US airlines and US pilots cannot operate,” the FAA said in a statement.

Extensive economic instability, uncertain demand for air travel, airspace restrictions, and other issues are likely to cloud over the aviation industry as the crisis continues

The European Union Aviation Safety Agency (EASA) doubled its existing security alert and expanded the warning for airlines and other civilian operators from 100 nautical miles to 200 nautical miles of the Ukrainian border with Russia due to fears of “mid-range missiles penetrating into controlled airspace.” “Operators should exercise extreme caution. In particular, there is a risk of both intentional targeting and misidentification of civil aircraft. The presence and possible use of a wide range of ground and airborne warfare systems poses a HIGH risk for civil flights operating at all altitudes and flight levels,” the EASA said.

Some of the immediate impact areas that have already emerged for the aviation industry ever since the crisis escalated include:

RE-ROUTING

Civilian flights have remained closed in Ukraine for almost a month now after Russian military advanced inside the former’s borders. The European Union, and Canada have shut the airspace to Russian aircraft along with the United States that has also banned Russian aircraft from American airspace. Russia too, in turn, has shut its air space for about 40 countries.

Russian airspace has a special advantage owing to its unique geographical location. It makes way for important Asia-Europe corridors. European as well as Middle Eastern airlines often use Russian airspace for reaching Asia and even Australia. Most of the flights from the US that fly to Asia often use routes over the North Pole and then proceed to fly down over Russia into China, Japan, Singapore and more. While many airlines will have to opt for rerouting, some others might also be forced to cancel their flights altogether. Hundreds of flights that otherwise flew over the Russian airspace are now forced to look for alternate routes which are mostly longer and more time taking. This is also impacting the overall operating costs.

FUEL PRICES

Longer routes also lead to additional fuel burn and hence added cost. The prices of the Aviation Turbine Fuel (ATF) are also moving upwards because of the soaring cost of crude. The oil prices have sharply shot up ever since the Ukraine-Russia crisis escalated. Oil prices skyrocketed to as high as $105 per barrel for the first time since 2014. This spike in price has come even when there’s no shortage in the supply yet. The sanctions and restrictions being imposed could also lead to other hindrances in the supply chain for the movement of materials.

Restrictions & Sanctions

Restrictions on not just airlines’ routes but also import/export activities of certain aircraft parts and materials is becoming a matter of grave concern for the industry. International travel was only beginning and starting to revive from the pandemic and the restrictions and sanctions further pose uncertainty that will impact passengers’ behavior as well. The international relations between any two countries and their actions against each other impact them more seriously, but other nations are not left untouched.

PEOPLE’S BEHAVIOUR

The uncertainty around travel had already left many people anxious, confused and overwhelmed after the novel coronavirus. With bans and violent situations on the rise, that ambiguity around travel will again take the forefront. Added to that, the spike in fuel prices and operating costs further increases the ticket prices which in turn will impact the number and frequency of passengers opting to travel around. The crisis is likely to force some people to rethink their travel decisions.

Europe’s favourite vacation places like Spain, France, Germany, and the United Kingdom (UK) were expected to be the hotspots for the vacation season. Summer vacation time was looking as a positive high coming in for the aviation sector in Europe as well as US domestically and internationally as well. However, now they are likely to suffer the brunt of the situation if the tensions escalate.

AIRLINES’ ACTIONS

Many large airline alliances have Russian airline partners and are likely to be encountered by the need to restructure. Many airlines like the Ukranian airlines have suspended operations. So many of the airlines are rerouting and operating within the present possible scenarios. Some countries have also initiated national programmes to bring back their stranded citizens. For instance, India’s Air India has been engaged with Operation Ganga to bring back Indian students who are stuck in Ukraine. Manufacturers like Boeing, Airbus, Bombardier have also suspended maintenance support to the Russian fleet.

Financially not the airlines were already not in a very viable place and the future does not look very sustainable either. This scenario at a time when airlines were just recovering having dealt with an almost cash burnt situation, is further pointing towards a delay in recovery and profitability.

The global aviation industry has encountered the war when the industry was feeling positive about demand recovery and reopening of many markets but is now again standing before an unknown turn.