Russia is mulling retaliatory measures against international sanctions imposed on it over the Ukraine crisis – including a possible ban on western airlines using Siberian airspace. European airlines’ shares fell sharply on the news, as did those of Aeroflot, the Russian carrier.
Why would a ban hurt?
Western airlines, notably European carriers, benefit from being able to fly on trans-Siberian routes because it is usually the shortest way of travelling from EU cities to Asian countries such as China, Japan and South Korea. One European airline, which declined to be identified, estimated that 12 EU carriers were responsible for 900 flights each week that pass over Russia to reach these three Asian countries.
Air France, British Airways and Lufthansa all use Siberian air space for routes to Asian cities but declined to comment. Flightradar24, an aircraft tracking service, estimates that Lufthansa operated 162 flights that passed through Siberian airspace over the past seven days, while Air France had 133 and British Airways had 93. Finnair, a medium-sized airline which does a lot of flying between Europe and Asia, had 115 flights going through Siberian air space, according to Flightradar24. Its data also showed many Asian carriers operating flights through the same air space.
Any move to ban western carriers from using these Siberian routes could push up their fuel bills. One European airline said that avoiding Siberian airspace – for example, by flying further south over Kazakhstan – would add 30 minutes to eastbound flights and 45 minutes to westbound ones. This appears to be why European carriers’ shares fell. Increased fuel bills would probably be passed on to passengers in the form of higher fares.
But why did Aeroflot’s shares slide?
European carriers pay charges for flying over Russian airspace. The European Commission estimates this comes to more than €300m each year and Brussels says much of this money goes directly to Aeroflot. Analysts at Otkritiye Capital, the Moscow-based bank, say the amount of money going to Aeroflot has never been disclosed but estimate the sum at $170m, or 18 per cent of the airline’s 2013 earnings before interest, tax, depreciation and amortisation.
Can Russia unilaterally close its airspace?
Absolutely. The Chicago Convention on International Civil Aviation says decisions on opening or closing air space are matters for individual countries. During the cold war, western carriers were barred from flying through much of the former Soviet Union’s air space, including Siberia, according to the European Commission. On flights to Japan, some European airlines circumvented Soviet air space by flying south and making refuelling stops in the Middle East or India. Other European carriers – including Finnair – went over the North Pole to reach Japan, having refuelled in Alaska.
Then the Soviet authorities decided to ask for compensation from EU carriers for flying over Siberian air space on routes to southeast Asia.
Are European authorities happy about that?
No. The European Commission has long asserted that the Siberian charges are much higher than in other countries – where airlines typically pay fees for relying on air traffic controllers to guide them through their territories. Brussels says the Siberian charges are not related to air traffic control and are in breach of EU anti-trust law and the Chicago convention.
In 2006, Russia and the European Commission signed an agreement that would supposedly lead to the charges being “cost-related and transparent” by January this year – but Brussels says this has not happened.
Brussels says one reason is Russia’s decision to link its implementation to its objections to the EU emissions trading scheme. Russia was one of many countries that objected to the EU’s proposal for non-European airlines to pay for their carbon emissions on flights to member states – although these plans were watered down this year.
Are the latest sanctions hurting Russia’s aviation sector in particular?
Yes. Aeroflot said on Sunday that EU sanctions had forced the grounding of Dobrolet, its new low-cost subsidiary, after European counterparties annulled aircraft insurance agreements and refused to fulfil leasing, repair and maintenance arrangements.
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