Russia's size and close integration in global aviation since the end of the Cold War mean sanctions related to its invasion of Ukraine are having outsized consequences on the industry, relative to earlier freezes on Iran and North Korea.
Manufacturers, lessors, insurers and maintenance providers for Russian carriers like Aeroflot, S7 Airlines and AirBridgeCargo are among those outside Russia that are being hit directly by sanctions.
Foreign airlines, meanwhile, are reeling from higher oil prices and the longer routes needed to bypass airspace over Russia, which are expected to drive up ticket prices and air-freight rates.
Leasing, insurance impacts
Russian airlines have been highly reliant on the global aircraft leasing industry to modernize their fleets with the latest Airbus and Boeing planes.
Russian carriers have 980 passenger jets in service, of which 777 are leased, according to analytics firm Cirium. Of these, 515 jets with an estimated market value of about $10 billion are rented from foreign firms such as AerCap and Air Lease.
The European Union has given leasing companies until March 28 to wind up current rental contracts in Russia.
But getting the planes back could be challenging due to airspace bans, potential issues with SWIFT-payment transfers and industry concerns the Russian government could nationalize the fleet to maintain domestic capacity.
Russia's state aviation authority recommended that airlines with foreign-leased planes stop flying them abroad.
Even if the planes are returned quickly, the huge number needing to be placed elsewhere could depress rental prices globally, analysts say.
Russian airlines have also been cut off from the insurance and reinsurance markets in the European Union and U.K.
An insurance industry source said it was unclear if lessors unable to repossess planes would be covered for losses under their own policies, which typically contain clauses canceling coverage in the event of sanctions.
Legal action may be needed to settle the issue, said the source, who was not authorized to speak publicly.
Service and parts bans
Russian airlines have 62 planes on order with Airbus and Boeing, according to aviation-consulting firm IBA, and those deliveries will be barred.
Manufacturers and maintenance firms are also banned from providing parts and services for the existing fleet. Germany's Lufthansa Techik said it had stopped serving Russian customers, involving hundreds of planes.
According to a report by the Tass news agency, the Russian transport ministry has drawn up a draft bill to help airlines until September 2022 that will allow maintenance by third-party firms and suspend all inspections of carriers.
Some aviation executives are concerned the sanctions prevent plane-makers from sharing service bulletins and airworthiness directives that are key for safety.
Viktor Berta, vice president of aviation finance advisory at ACC Aviation, said there was also a high risk that Russian airlines would need to strip parts from their existing fleet once spares run out.
Fuel prices, flight times
With the United States having said it is willing to ban Russian oil imports, oil prices have surged to their highest level since 2008.
Oil hedging, fuel surcharges and fare increases are among the measures airlines are taking to offset some of the pain at a time when demand remains low due to the pandemic.
High oil prices are, in some cases, compounded by circuitous flight paths needed to avoid Russian airspace, after reciprocal bans that can add up to 3.5 hours in the air.
The biggest impact is on flights between Europe and north Asian destinations like Japan, South Korea and China, but other affected routes include those between southeast Asia and Europe and the United States and India.
Longer flight times also lead to higher staff costs, less cargo carrying ability and higher maintenance costs on contracts that are charged on a flight-hour basis, said Brendan Sobie, an independent aviation analyst based in Singapore.
"Another concern is the impact on international passenger demand in some markets, resulting in a setback in the overall recovery of international air travel," he added.
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