• Wed. May 11th, 2022

What impact will the Russian invasion of Ukraine have on the airline industry? | Analysis

ByKimberly A. Brochu

Feb 24, 2022

The large-scale invasion of Ukraine by Russia is accompanied by a delicate phase of recovery of the commercial aviation industry.

Unfortunately for the sector, the effects of development are likely to ripple throughout the region and beyond.

In terms of airspace, there is now a gigantic area of ​​Eastern Europe without commercial air traffic, covering Belarus, Ukraine and western Russia.

Many airlines were already avoiding overflights of Belarus and eastern parts of Ukraine anyway, due to previous incidents, so the impact was felt to some extent. But more and more routes have become diverted overnight, including services heading south from Moscow, for example, as east-west sectors swell further outwards.

This last point is particularly important, given that the crisis in Ukraine will almost certainly lead to higher kerosene costs, as oil prices rise in response to the invasion. Airlines had already accepted that fuel prices were high during the Covid-19 recovery phase and that ticket prices would likely increase accordingly – this makes this situation worse and brings closer the point where these higher fares could start to have an impact on demand.

For a few individual airlines, the impact is enormous. Ukraine International Airlines and SkyUp are grounded for the foreseeable future. Just weeks ago, the UIA announced a schedule for summer 2022 that included the resumption of services to New York and Toronto, among a long list of destinations. And in December, the UIA said cost-cutting measures had returned the carrier to substantial profitability.

Meanwhile, Ukraine’s Boryspil International Airport, which serves the capital Kyiv, was among the top 30 airports in Europe in 2021 in terms of passengers, with throughput comparable to Brussels, Copenhagen, Milan Malpensa and Oslo.

Ukraine

For other airlines, the news is significant but not existential. A month ago today, Cirium timetable data showed that Ryanair and Wizz Air were the largest operators of international services to the country by capacity, ahead of UIA. In both cases, these flights represented a small proportion of pan-European networks.

Other international carriers offering significant services in the country include Turkish Airlines, Aeroflot, FlyDubai, Ural Airlines, S7, Lufthansa, Pegasus, KLM and LOT Polish Airlines.

All will be able to absorb the loss of Ukrainian services – most having been anxious to over-commit to a turbulent region in recent years – although any travel restrictions beyond those related to Covid-19 are deeply unnecessary. for the recovery of the sector.

For Russian airlines, a pivot to domestic services during the Covid-19 recovery raises hope that any drop in international demand can be managed. The potential impact of Russia’s further diplomatic isolation will, however, be a factor to watch in terms of flights into the country, whether from local carriers or international operators.

Then there is the intangible impact on confidence of traveling if a war is raging in Europe. Heightened security in countries neighboring Russia and Ukraine, combined with continued Covid stop-start restrictions, will test the much-discussed “pent-up demand” for air travel as the pandemic recovery takes hold. the extent.

Indeed, during an earnings briefing last week, Air France-KLM’s upbeat outlook for the current quarter hinged on the situation in Ukraine not deteriorating.

For the wider industry, there are a variety of implications to consider, particularly around the impact of sanctions on the aerospace supply chain. Russia, for example, is a huge metal producer.

On February 24, 2022, two years into the pandemic, the airline industry’s resilience to external factors is being tested again, much sooner than anyone would have liked.

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