The airline industry is bracing for another year of huge losses even as the Ukraine-Russia conflict keeps escalating. 

This development is expected to result in the steep escalation of aircraft leasing charges, which will hurt the cost of operations of Indian carriers and others. 

Rob Morris, Global Head of Consultancy at Ascend by Cirium says one of the biggest fallout from the current situation is the outlook for the commercial aircraft fleet leased into Russian customers by international lessors in the face of EU sanctions, which require termination of all such leases by March 28, 2022.  A Financial Times report put the figure at $5 billion worth of aircraft, which the European aircraft lessors are in the race to recover from Russia.

“At present, it is too early to know what plans operating lessors have for these 515 aircraft beyond initial compliance with the requirement to terminate the lease. Presumably at that time, lessors would prefer to be able to relocate the aircraft and records to a storage location outside of Russia,” Morris said. Boeing and Airbus have said they will stop supplying aircraft parts and services to Russian airlines. This will impact leased aircraft the most and those airlines in Russia which have deployed them will now have to stop flying them or return them immediately.

Several countries have already come together to block Russian aircraft from using international airspace. The European Union has announced that it is prohibiting all Russian-owned, Russian-registered or Russian-controlled aircraft from its airspace. The UK has also carried out a similar ban of Russian aircraft from its airspace. Russia too has closed its airspace to airlines from 36 countries, including all the 27 members of the European Union.

The airspace restrictions could in fact redraw the global aviation map as alternative routes have to be found to avoid using the Russian airspace. This could lead to higher spending on aviation turbine fuel due to an increase in fuel burn. With crude prices touching $120 per barrel, operating costs are set to rise further.

Published on March 6, 2022