Tuesday, August 5, 2014

Russia/EU: Moscow May Impose Restrictions on EU Carriers Transiting Siberia

According to Reuters, Russia may impose restrictions or a ban on European airlines using trans-Siberian routes, raising the cost of their flights to Asia, in response to European Union (EU) sanctions over Ukraine, the business daily Vedomosti reported on Tuesday (August 5).

Russian low-cost airline, Dobrolyot, run by state-controlled Aeroflot, had to suspended all flights last week after its plane lease agreement was cancelled because the EU extended sanctions on the carrier for operating flights to Crimea, the Black Sea peninsula that Moscow annexed from Ukraine in March 2014.

Possible restrictions on flights over Russian territory are being discussed by the foreign and transport ministries, Vedomosti quoted one source as saying.

COMMENT: The ban could affect not just European carriers including Lufthansa, British Airways and Air France, but would also impact Aeroflot which gets around $300 million a year in overflight fees from airlines flying across Russian territory, Vedomosti reported. 

Lufthansa, British Airways and Air France are aware of the possible move and are concerned over possible losses which could amount to 1 billion euros ($1.3 billion) for three months of restrictions, the daily quoted an unnamed source as saying.

The restrictions would lead to longer flights, higher fuel costs and additional costs for European airlines, putting them at a competitive disadvantage versus Asian rivals.