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August 5, 2014

Moscow May Ban Western Airlines from Russian Airspace

As American and Western European sanctions against Russia continue to increase, Russia is apparently considering "retaliatory measures" of its own: According to the Financial Times, Russian president Vladimir Putin is considering a ban on western airlines using Russian airspace.

The Associated Press is reporting that a report published by the Russian business paper Vedomosti quotes anonymous Russian officials as saying that the block would be a response to the sanctions the EU has imposed on Moscow following months of unrest and conflict in Ukraine. The officials say the idea of limiting or cutting off the airspace is being discussed but no formal decision has been made, according to the newspaper.

RELATED: Airline Industry Associations Debate Flying Over Conflict Zones

The ban would not only be damaging to international airlines that use Russian airspace, but domestic carriers as well: The AP noted that Russia's state-controlled carrier, Aeroflot, could lose out on the estimated 300 million euros it charges European airlines annually for the right to fly over Russia. 

Legally speaking, according to the rules of the EU Commission, Russia can opt to close its airspace at any time. Currently, each EU country has a bilateral deal with Moscow on whether its airlines can fly over Russia.

Responding to the increasing punitive measures that have been imposed against Russia by the US and the EU over the last two weeks, Putin reportedly said he had already instructed his government to prepare retaliatory moves that "should be done very carefully in order to support domestic producers but not hurt consumers,” the Financial Times quoted. 

The rumors are already having an impact on publicly traded airlines on a range of markets: Shares in Finnair, which operates many flights from Northern Europe to Asia, dropped 5.6 percent. Air France-KLM shares fell 3.8 percent while IAG, the owner of British Airways, saw a 2.9 percent drop. But Putin's goal of protecting Russian producers may not be realized: Aeroflot's shares fell the most at almost 6 percent.

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