The spiral of trade sanctions between the west and Russia continues to escalate. As reaction to the demise of Aeroflot’s low cost offspring Dobrolet the Kremlin considers closing Russian airspace for European passenger and cargo airlines. Doing so would be a one-sided breach of WTO obligations Moscow had granted to fulfill and instantly end bilateral aviation treaties signed with EU member states. In that case both Russian and European airlines would be the greatest losers.
Barely formed, already gone: Aeroflot’s budget baby seems to have terminated its life span of only some months. “Due to EU sanctions against Dobrolet we have to suspend all flights,” reads an announcement published by the airline this Monday (4th August). Suspend or end the project for good? The latter seems to be the more realistic scenario, aviation experts believe.
Immediately after the statement was aired, the two Dobrolet-operated Boeing 737-800s were returned to mother company Aeroflot for further commercial utilization.
What’s this got to do with any EU sanctions? The answer is simple. The Irish aircraft lessor BBAM “canceled the sublease agreement between Aeroflot and Dobrolet with immediate effect,” explained the budget carrier’s CEO Andrew Kalmyikov.
He went on to say that his airline’s biz model is based on operating a successively growing fleet of Boeing 737-800 passenger aircraft, from currently two to five till year’s end and up to eight -800s in 2015. But at the same time BBAM torpedoed the aforementioned sublease Irish SMBC Aviation Capital had announced to cancel a contract for leasing a third 737-800 to Dobrolet. “As result of the sanctions imposed by the EU on Russia,” Kalmykov stated. To get adequate replacement is almost impossible, the manager regretted. “We immediately approached Singaporean and Chinese companies to see if they can help out, but there are hardly any 737-800s available on the free market,” he regretted.
Kalmykov also excluded getting Russian SSJ-100 jets as a replacement for the B-800s because a fleet rollover would dramatically change the carrier’s entire biz model with no net profits in sight.
As things stand, Dobrolet is the first Russian carrier that bites the dust as indirect result of the sanctions. These come into effect mainly as reaction of the west to a decree of the Russian government demanding from Russian low cost airlines to operate flights to the Kremlin-annexed Crimea peninsula. Thus, they stand automatically on the sanction list of the west, being cut off from any further support.
Putin threats to seek vengeance
Alarmed by the fate of Dobrolet and in response to the imposed sanctions, Russia’s President Putin has indicated his government might retaliate against the west by closing the country’s airspace for overflights of European cargo and passenger airlines. Currently, the Kremlin’s Transport Ministry and the Foreign Ministry are jointly checking out on the pros and cons a closure of the transit routes entails, with no official recommendation made yet.
If so, Aeroflot will be hardest hit because most of the Moscow-demanded royalties paid by foreign carriers for being allowed to cruise Siberian skies flow directly into the coffers of Russia’s number one airline. According to estimates these amount to roughly U.S.$300m per year. But EU airlines would suffer as well if they would be banned from Russian skies. If so, they’d have to circumvent the vast territory on their way to Fareast by taking a more southerly route, leading across CIS states like Azerbaijan, Kazakhstan and Uzbekistan. Experts speak of an incurred loss potential of up to one billion euros if the ban will last three months.