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Business Aviation And The War In Ukraine

The entire world has been affected by Russia’s sudden invasion of Ukraine. The economic ripple effects are certainly secondary to the pain felt by the Ukrainian people, but both the war itself and the resulting sanctions levied on Russia have had global repercussions that are still unfolding and will continue to impact markets worldwide.  

Wondering how business aviation will be affected? With experts warning that they see no clear end to the conflict, impacts aren’t expected to go away any time soon. From travel restrictions to fuel costs and beyond, read on to learn what the war in Ukraine means for the private aviation industry.  

HOW IS THE WAR IN UKRAINE AFFECTING BUSINESS AVIATION? 

Rising Jet Fuel Prices

The economic impact of Russia’s invasion is already being felt at the gas pump in the United States, and those costs are being passed on to business jet travelers. In Forbes, Doug Gollan predicted that many fixed-rate private aviation programs will begin to implement fuel surcharges. So, how did we get here? 

A multitude of other factors from inflation to a post-COVID increase in demand for gas were already causing fuel prices to rise; the war has only accelerated the price climb, with the Wall Street Journal reporting that the national gasoline average has topped $4 per gallon. Even though the United States is not a major importer of Russian oil, the heavily interconnected and global nature of the commodities market means that prices are going up for everyone. With the White House’s announcement that the United States has banned imports of Russian oil, the price is only expected to rise further.  

Naturally, aviation fuel prices have been affected too, with Energy Intelligence reporting that the war has triggered “jet fuel pricing chaos.” Reuters reported on March 8 that global jet fuel prices had reached near 14-year highs. According to data from S&P Global and Platts, the global jet fuel price posted on February 18—the week before Russia’s invasion—was 292.7 cents per gallon and has risen to 363.2 cents per gallon as of March 11. While the war isn’t the only cause for the surge in jet fuel costs, it has certainly exacerbated the situation.   

RUSSIA/UKRAiNe AIRSPACE CLOSURES  

As the invasion began, the airspace over the entire country of Ukraine was closed along with the airspace over Moldova and part of the airspace of Belarus. Then, in response to bans by western countries on Russian aircraft, Russia also closed their airspace to 36 countries, including all 27 nations that make up the European Union. An enormous portion of the globe now must be avoided by all aviation, creating further logistical headaches.  

Avoiding Russian airspace has especially presented routing challenges in Asia-Pacific markets. NBAA International Operations Committee Chair John Tuten said Russia’s airspace closure has impacted roughly half of all routes between the U.S. to India and the Asia-Pacific, with up to five more hours being added to divert around the airspace closures in some cases. As Business Insider notes, the extra flight time and “creative routings” can mean thousands more dollars in operating costs, raising cargo rates, passenger airfare, and private charter flight pricing.   

For maps and graphics showing these airspace closures and some of the “creative” flight re-routings they’ve caused, see Reuters’ excellent piece, “Unfriendly Skies: How Russia’s invasion of Ukraine is redrawing air routes,” published last week.  

SANCTIONED INDIVIDUALS AND BUSINESSES BLOCKED FROM PRIVATE AVIATION 

Earlier this month, the United States joined Canada and the European Union in blocking all Russian aircraft from its airspace. There was initially confusion over the scope of these bans; In their original NOTAM issued March 2, the FAA banned from U.S. airspace “all aircraft, regardless of the state of registry, owned, chartered, leased, operated or controlled by, for, or for the benefit of, a person who is a citizen of the Russian Federation.” That meant the ban didn’t just apply to Russian commercial airlines or Russian-owned aircraft, but to any Russian citizens attempting to charter private jets. Charter operators who attempted to fly Russian citizens were subject to large fines, as in the case of this jet chartered by a Russian national in Canada last week 

As Corporate Jet Investor reported after the EU announced its ban in late February, the situation presented “a massive headache for operators,” who had questions about a variety of related issues—including what to do when an individual in question has dual citizenship or shared/fractional aircraft ownership by Russian citizens.   

On March 10, the FAA revised their NOTAM, narrowing the list of prohibited parties from “a person who is a citizen of the Russian Federation” to only “a Russian person or entity identified by the International Trade Administration’s Consolidated Screening List,” meaning the ban now only applies to persons or groups who are the target of the sanctions and not to the average Russian citizen. However, as NBAA Senior VP of Safety, Security, Sustainability, and International Operations told Flying Magazine, “If you’re on that list, you’re not going to be flown in the United States.” NBAA’s Senior Director for Public Policy and Advocacy Scott O’Brien said operators now must perform an increased level of due diligence to determine that their customers are not on the sanctions list, adding, “It’s important they have clarity on who’s paying them in ways they may not have needed to pursue before.” 

EFFECT ON THE GLOBAL BUSINESS JET FLEET 

According to Aviation International News, sanctions have tied up nearly 500 business aircraft that have “significant ties to Russia.” WingX’s March 10 Weekly Business Aviation Bulletin said the loss of these aircraft due to sanctions had only a minor effect on overall flight activity, adding, “The swift decline in outbound flights from the directly affected regions is more than offset by the ongoing strong demand for on-demand travel as the final constraints on travel restrictions are lifted in Europe and the US.” While Doug Gollan reports that Russia’s business aviation segment is small compared to that of the United States, he notes that a whopping 43 percent of Russia’s business aviation flights were on heavy-cabin, long-range jets—meaning the sanctions may provide a more significant impact on the global fleet of these larger jets.  

With so many aircraft affected, anybody involved in aircraft transactions or the arranging of flights now must be extremely vigilant regarding the status of the aircraft they’re dealing with. In an article posted this week, the NBAA said international sanctions “make it more important than ever for business aircraft buyers, sellers, and air carriers to be thorough in conducting their due diligence on the parties involved” to make sure they are not dealing with a jet owned or operated by a sanctioned individual or entity. Just as due diligence must be performed regarding who is being flown, that due diligence extends into research about what is being flown or sold—a task Aviation International News said “could be extremely onerous given the widespread use of shell companies that disguise the identity of aircraft owners.” 

POSSIBLE IMPACT ON SUMMER TRAVEL  

With COVID-19 rates falling, many foresaw summer 2022 as the travel industry’s big return—Expedia’s CEO even predicted it would be the “busiest travel season ever”—but the war and resulting economic pressures may curtail international travel plans. In fact, a study by MMGY Travel Intelligence in the first week of March found that the war in Ukraine was “now twice as likely as COVID-19 to impact Americans’ vacation plans to Europe.” 

It’s not yet certain yet how many travelers will be deterred by the conflict in Ukraine. “While Kyiv isn’t Paris and Moscow isn’t Madrid, the war in Europe has apparently put millions of potential travelers into a holding pattern,” Forbes wrote on March 7. “Higher fuel prices, fewer flights, higher air fares and a plunging stock market don’t help either.” However, a recent Inc. article reported that travel and hospitality businesses are still seeing demand for European travel this summer despite the war, thanks to pent-up demand after two years “largely cooped up indoors” and a dollar that is holding strong against the euro. Either way, many travelers are being encouraged to book early as prices are expected to rise.   

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