Effects of airspace closure over Eastern Europe

With the Russia-Ukraine war breaking out and the skies over Eastern Europe already closed for civilian flights, the global aviation industry is entering a zone of unprecedented turbulence with no clear solution to the crisis visible.

- AMARTYA SINHA

The sudden Russian invasion of Ukraine has triggered countless numbers of overflight bans, which has had a tremendous impact on the balance sheet of most carriers. The strangle trends on the civil aviation sector in Russia and Europe are getting stronger by the day.

While the overflight bans imposed by a still-growing group of nations have mostly affected Russian airlines. Russia's retaliatory overflight bans have had a distinct and adverse impact on the flight schedules of European airlines as well.

The rapidly increasing cost of air turbine fuel (ATF) has compounded the adverse cost and traffic effects of longer flight routings and flight times on European carriers. With crude oil prices trending upward as the US and UK ban imports of petroleum products from Russia, reaching a 13-year high overnight on March 7, and ATF hitting a $3.61 per gallon spot price in New York, there is no guarantee that in the near future jet fuel prices won't exceed the $3.89 all-time peak they experienced in 2008.

Meanwhile, gasoline prices in America have risen through $4 a gallon and are higher still in Europe. Not only is there a danger in a business environment where leisure traffic is predominant and fares are low, airlines will soon have to try to levy an extra 14 per cent to 20 per cent surcharge merely to recoup their increased fuel costs, but the increased costs of gasoline could adversely affect air traffic.

Ultra-low-cost carriers such as Ryanair, Easyjet, Wizzair, Frontier Airlines, Spirit Airlines, and Allegiant Travel appear better placed than the big ‘legacy' mainstream carriers to handle the forces pressuring their businesses in an environment of rising petroleum prices. Their overhead costs are lower than those of the hub carriers, their business models allow for stripped-down fares, and their non-hub route networks are less exposed to lost business traffic.