DALLAS – Willie Walsh, IATA Director General, shared the perspective of the association on the war in Ukraine and the ensuing humanitarian crisis. His words are followed by an analysis from IATA, ranging from safety concerns to the impact of soaring oil prices.
Walsh’s statement began by condemning the war in Ukraine, “I am appalled by the unlawful invasion of Ukraine by Russia and stand in solidarity with the Ukrainian people under siege.”
He went on, “Aviation promotes peace and freedom by bringing people together, but that peace has been shattered, the human cost of which is horrifying. My heart goes out to all the people of Ukraine, including industry partners and colleagues.”
Impact on IATA’s Settlement Systems
IATA reported its settlement systems are facing new challenges as a consequence of the dramatic reduction in connectivity between Russia and the rest of the world. The association’s settlement systems process transactions between airlines and travel agents. It was designed to transfer funds from ticket sales to airlines, but in these extraordinary times, the focus is on processing refunds for cancellations or delays.
IATA estimates that about 140 airlines participating in IATA’s Russian BSP (Billing and Settlement Plan), as well as thousands of travel agents worldwide, are affected. The situation has become increasingly challenging with the implementation of continually increasing sanctions against Russia by Western nations.
Enroute ATCs, Unused Slots
Interestingly, IATA provided an analysis of the impact that the closure of Russian aerospace in terms of RPK (revenue passenger kilometers).
The airspace closures and route diversions affect over 10% of pre-COVID-19 international travel volumes (RPK basis), including travel from Europe to Asia (4.5%), North America to Asia (3.0%), and North America to the Middle East (4.0%).
However, IATA reports that with the current level of air traffic, the actual number of flights encountering longer flight times is limited. Yet, IATA is aware that the situation will need careful management as the Asian markets relax restrictions and travel volumes will keep growing.
As a clear consequence of airspace closures, IATA expects a large number of slots at key airpots worldwide to be unused. At the same time, other slots will need rescheduling to fit with longer flight times.
The aviation body says it is working closely with the Worldwide Airport (Slot) Coordinator Group to ensure flexibility and to share information on schedule updates among aviation stakeholders and passengers as quickly as possible.
Finally, IATA cited safety concerns as it monitors the evolution of the situation. A major area of attention is the availability within Russia of spare aircraft parts. IATA clearly stated it has a long-standing policy of opposing sanctions that could see a degradation of aviation safety, such as banning the export of the above-mentioned items.
The association warned that the bans on Western-manufactured spare parts could compromise the safety of all aircraft operating in or transiting over or near Russian airspace.
The IATA report added that there could be a need for aircraft that may need to divert to Russian airports in an emergency.
Soaring Fuel Price
Walsh concluded with an analysis of the huge volatility in oil prices brought by the war, stating that, “when we made our most recent industry financial forecast last autumn, we expected the airline industry to lose US$11.6bn in 2022 with Brent crude at US$67/barrel and fuel accounting for 20% of costs.”
He continued, “The oil price has spiked to near US$130/barrel. And it has been volatile within the US$95–$110 range for a month. As fuel is an airline’s largest variable cost, absorbing such a massive price hike just as the industry is struggling to emerge from the two-year COVID-19 crisis is a huge challenge. If the oil price stays that high, then over time, it is reasonable to expect that it will be reflected in airline yields.”
Featured image: Antonov Airlines UR-82060 Antonov An-225 Mriya. Photo: Lorenzo Giacobbo/Airways