Bursting the Bubble

Why Russia will not close its sky to EU airlines (and why it might)

22 September 2014 | by

With a new set of sanctions imposed on Russia by the EU last week, the trade war between the two sides is gaining momentum. Postulating the potential Russian response, the rumours say that the government at the Kremlin may decide to close its airspace to airlines from the EU and the USA. As alarming as these rumours sound, will Russia actually take that step? It is highly dubious, and below are the reasons why.

Undoubtedly, the ban on flying over Russian territory along the corridors spanning above Siberia would heavily impact the EU’s commercial air carriers, as this is the shortest route to fly from Europe to many destinations in the Far East. Should the Russian sky be closed,airlines like Lufthansa or Air France could, of course, try re-routing their flights through the Middle East and Central Asia, but such would make them longer, more expensive and in case of some destinations, counter their economic rationale.

The ban would likely mean a swift bankruptcy for the loss-generating Finnair, whose business model is completely reliant on the location of its hub in Helsinki and the numerous long-haul Asian connections. It is beyond doubt that if the 1600 aircrafts crossing the Siberian airspace every week had to take a different route, the impact on the EU’s economy would be hefty.

The count above excludes the flights to destinations within Russia, also counted in hundreds weekly. This note is an important one, as there is a difference between having the right to fly to a country and the right to cross its airspace en route to somewhere else. What we are talking about in this case is the right to fly over the country’s territory without landing, which in the world of civil aviation is known as the “1st freedom”(out of 9 freedoms total).

The first question for us to ask should be; does Russia actually have the right to issue a ban on flying over its territory, especially one that would be targeted specifically at the airlines from the EU and the USA, but not those from other countries? Would it not violate some global agreements on civil aviation?

The response to the question above is positive, meaning that the government at the Kremlin indeed has the right to deny access to aircrafts from countries of its choice. Unlike the USA and all the EU countries, Russia has never signed the International Air Services Transit Agreement (IASTA), through which 130 countries mutually granted each other access to their airspace for the use of commercial aviation. Other governments, including Russia, preferred to maintain more control over who enters its airspace and has solved the matter of access by signing separate agreements with countries individually. Therefore, banning EU carriers from  flying over Siberia would not breach any international laws, as if Russia ever cared about abiding to them.

The second question is; would this step make sense for Russia? Here, the response is no. And it is not just a single no, but a triple NO, written in capitalised, flashing red letters.

First of all, restricting airspace access would cost the Russian side at least as much as it would cost the EU. As for all other services in the aviation sector, there are fees collected by each nation for the right to cross its airspace. The airlines have to pay for using the traffic control services of the country they travel through, usually around $50 per 100 nautical miles. In Russia, the exact prices per plane are kept secret, but the total annual toll is known to exceed $170m. Collected by Aeroflot, it is a persistent flow of state aid to the national airline carrier. Given that the airline yielded a $230m profit in 2013, according to its financial statements, the overflight ban would likely result in putting Russia’s biggest airline close to the break-even point.

In addition to the direct financial consequences for Aeroflot, the Russian overflight ban would be easy to circumvent. Although the world of civil aviation does not know mercy and is indeed a very competitive market, the airlines from Europe do have some friendships they could make use of. The EU carriers are allied with many East-Asian airlines within the three big alliances, providing them with a number of lee way to get around the Russian ban.

To name just one of those forms of lee way, why shouldn’t the European airlines just lease their aircrafts to their far-eastern partners and let them sell tickets for the same routes on their behalf? Their Asian partners could use the same aircrafts to operate on the same routes and the only change would be that the operating carrier would be different from a formal point of view. For example, the German Lufthansa could easily use its codeshare agreement with All Nippon Airlines, allowing the Japanese airline to become the operating carrier of the flights that currently connect Frankfurt with Tokyo, Osaka and Nagoya, whilst using the aircrafts belonging to the German national carrier.

Should this scenario become real, Russia would have to also close its airspace to the Asian partners of the EU airlines in the next potential step. This would mean opening a new front of antagonised countries, including countries which Putin wants to use as a backup in the clash between Russia and the West. Ensuring the effectiveness of the overflight ban would require Russia to put itself in isolation not only from the West, but also from the East.

All of the above renders the overflight ban as a reckless step with no chances of success. However, one must not forget that a complete ban is not the only option at the hands of the Russian president. Given that the right to cross the Russian airspace is granted to each state individually, Putin is free to pick just a few countries whose airlines will be struck by the aerial closure, and continue playing on the divides within the EU, following what he has been doing since the very start of the Ukrainian conflict.

Banning carriers from selected EU members, such as the Polish LOT from flying above Russia on its 4-weekly connection to Beijing would be a heavy punch for Poland’s national carrier. The airline, which is gradually recovering after escaping bankruptcy in late 2012 thanks to a substantial dose of public aid (recently approved of by the European Commission), delivered a long-awaited operating profit at the end of August.

The Polish carrier prepares itself to fight back, despite hardly being a robust enterprise. Although it is prohibited from expanding its services until late 2015, due to the EU competition rules, LOT plans to become an active player in the Far East after that date by opening a number of new connections to Asia. This seems the only logical direction for the airline, given the location of its hub in Warsaw. Regrettably, as an airline from the, probably, most anti-Russian EU country, LOT is also a perfect target for Putin, if he makes the logical decision to take advantage of the EU’s internal differences.

The bad news is that here, Putin might win. A symmetric overflight ban from the EU, targeted at Russia, would be rather spineless, as the number of Russian aircrafts transitioning  through Europe while flying somewhere else is extremely low. Potential overflight bans imposed by individual countries, such as Poland, would be equally ineffective, given the number of alternative routes around.

If we ever reach that point, the EU members should respond by acting uniformly in banning all Russian aircrafts from landing at European airports altogether. Only then would the response be meaningful and symmetric in practical terms. However, the prospects for such European unity are dim, considering the amount of disagreement on Russia-related issues up to date.

Prohibiting Russian aircrafts from landing in Europe would be something more than just denying them the right to transition through the European airspace and it would incur further steps taken by Russia that could ultimately lead to a complete suspension of all traffic between it and Europe, which is more of a sci-fi plot than an actual possibility.

All of the above scenarios are obviously highly hypothetical and, as I argued, will likely never come true. Yet, even as a distant menace, they inject uncertainty to the vulnerable airline business, threatening and destabilising this important sector of the EU’s economy. The number of question marks and the degree of insecurity on the European side is yet another example about how the lack of integration and the multitude of conflicting national interests jeopardise the EU’s ability to stand firm.

What do you think?