“But that would be cutting off one’s nose to spite one’s face. These routes generate significant revenue for Russia in royalty payments.”

As a reaction on new European Union sanctions looming over Russia, on Monday September 8th, Russian prime minister Dimitry Medvedev threatened to decline access for European flights through Russian Airspace. Medvedev stated that ‘bypassing our airspace could drive many struggling airlines into bankruptcy’. And indeed, because of the sheer size of the world’s largest country, it would cost a lot of money for European airlines, if they had to bypass Russian airspace. Such a restriction would especially hit European airlines offering direct flights to Asia.

At the moment, airlines extensively use Russian airspace. According to data by flightradar24.com, on September 1st 2014, European and US airlines accounted for the majority of foreign flights operated over Russia. As can be seen from in figure 1, European and US airlines, account for 59% percent of foreign flights operated over Russia.figure1

The shortest route from Amsterdam Airport Schiphol (AMS) to Narita International Airport in Tokyo (NRT), Incheon International Airport in Seoul (ICN), and Beijing Capital International Airport (PEK), clearly pass through Russian airspace (figure 2). Shutting down Russian airspace for European airlines would affect normal flight operations. European airlines like KLM, British Airways, Lufthansa and Air France, which are frequently operating flights to Asia, would have to divert to more northern or southern routes. These routes are longer, take more time, and burn more fuel than regular flights. According to KLM, rerouting a flight to northern Asia to bypass Russian Asia would add €30.000 to the total flight costs. In addition, ticket prices would have to rise in order to cope with the increased costs of operation. Concluding, Russia’s measures would definitely hurt the financial and competitive position of European airlines.
In practice, airlines generally do not fly the shortest route to their destination. Airlines are, depending on the kind, demanded and or requested to not fly through no-fly zones. Most common no-fly zones are used for military purposes. Route decisions are taken by airlines. Generally, airlines avoid no-fly zones. For example, Syria is avoided by all airlines at the moment. However, North Korea and Somalia, are not avoided by all airlines. Airlines use a variety of sources in order to assess the safety of an air transport route. These sources include National air transport authorities, and international aviation organizations like the International Air Transport Association (IATA) and International Civil Aviation Organization (ICAO). It is not clear how often airlines ignore no-fly zones out of commercial interest.

figure2Cutting off their nose to spit their face

Restricting access to Russian airspace is not something new. In 2007, it banned Lufthansa’s cargo unit from its airspace, in an apparent attempt to pressure the airline to move its hub to Siberia. In fact, Russian airspace was closed during the cold war. However, after the collapse of the Soviet Union, Russia liberalized its airspace rules, resulting in an vast amount of generated revenue from over-flight charges. To illustrate, according to I. Stupachenko, analyst at Otkritie Capital in Moskow, ‘Aeroflot collects royalties from foreign carriers from Siberian overflights, receiving about €170 million in 2013’. By restricting access to European carriers, Russia would significantly hurt its national airline, for which the royalty payments are equal to 18 percent of full-year earnings.
As a consequence of shutting down Russian airspace, the European Union would most likely, as a response, close its own airspace to Russian airline Aeroflot and their partners.
Research has shown that there is a direct connection between the amount of direct flight connections and economic growth. For example, a report from Frontier Economics demonstrated that UK businesses trade 20 times as much with emerging market countries that have a direct daily flight to the UK as they do with those countries that do not. While flight connections are not a sufficient condition to create trade and economic growth, connectivity ìs an essential component of developing trade relationships. Without excellent connectivity to the world, other economies are likely to step. Therefore, if the EU decides to pursue airspace counter measures, the Russian economy would cripple. The question arises whether or not Russia is willing to take that risk by closing their airspace first.
In conclusion, restricting European airlines access to Russian airlines would indeed affect the financial and competitive position of these airlines and the European Union as a whole. However, shutting down the airspace would have at least the same amount of adverse effects on Russia. Not only would Russia receive less revenue from over-flight charges, they would also lose lots of connections to vital destinations, resulting in a decrease in economic value.