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Airlines tackle Russia risks as fallout widens

The fallout to the global aviation industry from Russia's invasion of Ukraine spread on Friday as two more European countries banned Russian carriers and the European Union said it would restrict exports of aircraft parts.

Virgin Atlantic and British Airways began routing flights around Russian airspace after London and Moscow banned each other's airlines in tit-for-tat retaliation over the Ukraine invasion. Poland and the Czech Republic also said they were banning Russian airlines from their airspace.

Some industry leaders said they were prepared for further bans despite the prospect of a costly sanctions war over mutual overflight rights.

The governing council of the United Nations' aviation agency, the International Civil Aviation Organization, met to discuss the conflict at a meeting on Friday.

A representative of Ukraine also participated in the Council meeting on the basis of the State’s stake in the situation.

The topic was considered by the Council on the basis of an oral statement delivered by the President of the Council, Salvatore Sciacchitano, together with a presentation from ICAO Secretary General, Juan Carlos Salazar, which updated Representatives on the operational aviation context.

The Council States condemned the violation of the territorial integrity and sovereignty of a United Nations Member State, including its airspace, as being inconsistent with the principles of the Charter of the United Nations and Article 1 of the Convention on International Civil Aviation (Chicago Convention).

The Council also expressed grave concerns on the latest developments in Ukraine, and solidarity with its people, in direct alignment with the sentiments expressed by the United Nations Secretary-General in his statements to the UN General Assembly on 23 and 24 February 2022.

States representatives also recalled the preamble to the Convention on International Civil Aviation (Chicago Convention), which identifies the need to avoid friction and instead promote cooperation and friendship among nations and peoples, on which the peace of the world depends.

The Council further underscored the paramount importance of preserving the safety and security of international civil aviation and the related obligations of Member States, and in this context, urged the Russian Federation to cease its unlawful activities to ensure the safety and security of civil aviation in all affected areas, and to respect its obligations under the Chicago Convention as well as other relevant international air law treaties. It called upon all concerned parties to seek to resolve the crisis through peaceful dialogue and diplomatic channels.

The Council also recalled with deep sorrow the human suffering that was caused as a result of the downing of flight MH17 in the east of Ukraine on 17 July 2014 and underlined that such a tragedy should never happen again.

In the same context, the Council reconfirmed its support for the “Safer Skies” initiative led by Canada relating to improving international efforts to safeguard civilian flight operations over or in the vicinity of conflict zones.

Russia's invasion has "significant potential to derail the fragile airline recovery in Europe," Rob Morris, chief consultant at UK-based Ascend by Cirium said.

While many airlines are still using Russia's east-west transit corridors, some have begun asking about capacity in Anchorage, harking back to Alaska's Cold War use as a refueling hub for jets barred from Soviet airspace.

Western airlines, lessors, and manufacturers were assessing the growing risks of doing business with Russia as sanctions targeted Russian companies, banks, and individuals.

Delta Air Lines said it was suspending a codesharing service with Russia's Aeroflot.

"It will be more difficult for investors to accept portfolios of aircraft assets containing Russian airlines. Nobody wants to take Russian risk today," aviation adviser Bertrand Grabowski said, adding that fears included a lack of insurance coverage.

Russian forces were closing on Ukraine's capital on Friday in the biggest attack on a European state since World War Two. Airspace in Ukraine, Moldova, parts of Belarus, and southern Russia near the Ukraine border has been closed, giving airlines a narrower range of routing options.

Japan Airlines on Thursday canceled a flight to Moscow, citing potential safety risks and Britain closed its airspace to Russian airlines, including Aeroflot, as part of a raft of punitive measures. In response, Moscow barred British airlines from landing at its airports or crossing its airspace, citing "unfriendly decisions" by London. Virgin Atlantic said skirting Russia would add 15 minutes to an hour to its flights between Britain and India and Pakistan.

American Airlines Group said it had re-routed its Delhi-New York flight.

Rival United Airlines, however, was still using Russia's airspace for Delhi-Chicago and Delhi-Newark flights, according to flightradar24. SANCTIONS RISKS Gulf carrier Emirates said it had made minor routing changes, leading to slightly longer flight times.

United Parcel Service said it was implementing contingency plans. OPSGROUP, an aviation industry cooperative that shares information on flight risks, said any aircraft traveling through Russian airspace should have such contingency plans in place for closed airspace due to risks, or sanctions.

Revenue from Russian overflights goes to state carrier Aeroflot.

"Russia is unlikely to initiate their own sanctions and airspace bans as they would not wish to see Aeroflot receive reciprocal bans," OPSGROUP said.

"However, they may react in response to sanctions from other states." Airlines were also reeling from a rise in oil prices to more than $105 a barrel for the first time since 2014.

That raises operating costs at a time when travel demand remains low because of the pandemic.

Rating agency Fitch said airlines' profits and cash flows could suffer if crude prices continued to rise or stayed high. Jefferies analysts said European airlines were likely to take a longer-term hit in light of the conflict. A network of millions of parts has also been affected.

Washington announced export controls on goods including aircraft parts. European Commission President Ursula von der Leyen said the EU also planned to stop exporting such parts to Russia. The U.S. said there would be steps to uphold safety.

"(W)e believe that sanctions and export control activities should not hinder the need to maintain flight safety of commercial aircraft," said Eric Fanning, chief executive of the U.S.-based Aerospace Industries Association.

Russian airlines have 980 jets in service, of which 777 are leased, according to analytics firm Cirium. Of these, 515 with an estimated market value of $10 billion are rented from abroad.

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