While many of the adjustments made by airlines during the Covid-19 crisis would once have been unthinkable, the industry that is emerging from the pandemic looks quite a lot like the 2019 one. War, on the other hand, is forcing some fundamental rethinks
When Emirates Airline president Tim Clark suggested back in March that the Russia-Ukraine war could have long-term consequences more serious than those caused by the Covid-19 pandemic, it felt like an outspoken opinion.
“From an airline point of view… going forward with what I would call the economic iron curtain moving to the east and the exclusion of Russia in the future [with the] civil aviation power that it has, is going to cause a tectonic shift in the way airlines and the aviation business goes about its business,” he said.
At the time, the airline industry was still fresh from another pandemic setback caused by the Omicron variant of Covid-19.
The war itself was in its early stages.
As a result, it was difficult to grasp how anything could match the ruinous impact of the pandemic on the industry.
But in recent weeks and months, it has become increasingly evident that Clark had a point about the longer-term impact of war in Europe versus the Covid crisis.
Today, as airline industry emerges from the pandemic, most fundamentals are unchanged from 2019, as are the key players in big markets. Debts may be higher and workforces and fleets a bit smaller, but even the fearful predictions about business travel being structurally smaller post-pandemic are proving to be unfounded.
The oft-discussed ‘new normal’ that people suggested would result from the crisis is looking very much like the old one.
In the case of Russia-Ukraine war, however, things are changing for the long term – within the industry and without.
That is no better illustrated than through two recent developments.
“We do not have a unique geographical advantage anymore,” said Finnair chief executive Topi Manner in early September, referring to the ‘short northern route’ through Russian airspace that once underpinned the Oneworld carrier’s strategy with its services to Asia.
“Profound change” was needed for the carrier to adjust the new normal, Manner said, where all bets are off regarding when a resumption of flights over Russia might be possible.
Finnair is at the extreme end of the war impact – certainly for carriers outside Russian and Ukraine – but others in Europe and Asia-Pacific also face fundamentally changed calculations regarding the economics of connecting the two regions, as a result of the airspace closures.
Some, such as Air Baltic, are at the sharp end of the geopolitical challenges, and are wet-leasing out a big chunk of capacity as a result.
In Russia itself, Aeroflot Group’s recent order for 339 locally made aircraft reflects the aforementioned ‘iron curtain’ that prevents the country’s airlines from accessing Western jets for the foreseeable future.
The aircraft cover 210 Irkut MC-21 twinjets, 89 of the Irkut SSJ-New – a revised version of the Superjet 100 – plus 40 Tupolev Tu-214s.
That order came as state technology firm Rostec’s general director, Sergei Chemezov, claimed Boeing and Airbus jets are “unlikely ever to be delivered to Russia again”.
Lessors know only too well that Chemezov has a point, with many having written off the value of Russia-based airframes from the two manufacturers in recent months.
Ultimately, Clark’s talk of a “tectonic shift” now feels quite reasonable.
And it was not a case of him playing down the impact of the Covid-19 crisis, which he described as “probably the most traumatic thing that’s hit the airline business and the global economy”.
But the pandemic was always going to have an end-point.
When it comes to Russia’s relationship with the West, the airline and aerospace sectors are currently making long-term adjustments that suggest a genuine ‘new normal’ is emerging.
