Allison Lampert and Tim Hepher

PARIS/MONTREAL, (Reuters) – Airlines and leasing companies controlling billions of dollars worth of passenger planes are preparing contingency plans to freeze business with Russia in the event that the dispute over Ukraine’s borders turns into a war.

U.S. officials warned Moscow that it could attack Ukraine after amassing over 100,000 soldiers close to the border. The West is preparing severe sanctions.

Russian company dealings will be affected, aviation bosses fear. Any sanctions could cause disruption to payments to leasing companies, and Moscow might retaliate to limit access to Russian airspace. This would throw East-West trade into turmoil.

A source from West said that they expect an “asymmetrical Russian reaction”. He added that the West would not restrict its airspace before it.

Russia is a crucial trade hub because of its 26,000,000 km (or 10 million miles) worth of air corridors connecting parts of Europe, North America and Asia.

Cargo activity is especially high. FedEx, the U.S. carrier (NYSE:), stated Monday that it had made unspecified contingency planning.

Experts warn that without access to Russia’s airlines, airlines may have to divert their flights to the south in order to avoid areas of tension and conflict in the Middle East. This adds significant cost to an airline already struggling from the pandemic.

Some reports claim that the Cold War scenario of European planes flying over North America in order to fuel at Anchorage and then descend to Tokyo has been revived by the crisis. This could have a significant impact on the economy of these flights.

The spokesperson claimed that so far no airlines have reached out to Alaska’s airport, the largest in Alaska. They are interested in exploring this possibility, but it would need more ground-handling capabilities.

However, the situation is an example of how Russia’s position and size on the aviation map provides it with leverage that was not possible for the Soviet Union in times when their economies were more integrated. According to Elisabeth Braw (senior fellow at American Enterprise Institute),

Braw said in an article in Defense One last month that “So far Moscow hasn’t threatened to revoke overflight right, but it knows it has a tremendous weapon at its disposal.”

Experts say it is difficult to forecast the effect on critical Russian flights, even if there are no formal retaliations.

Every one of these procedures requires prior clearance which may not be granted every time. Analyst Robert Mann stated that there is every reason to suspect that some requests might not be granted if the situation becomes serious.

LESSOR CONCERNS

Russia’s 8000 air traffic controllers processed 194,296 transit flight, which is 532 more flights per day on an average, in 2021.

That’s up 16% from coronavirus-depressed levels in 2020 but still 37% below pre-crisis traffic in 2019, according to the Federal Agency for Air Transport.

The source from the West stated that while it would be catastrophic in normal circumstances, Asia traffic is much lower than usual.

Analysts believe Russia is earning significant overflight fees.

Tensions have been rising in recent months and U.S. airlines expressed concern that Russia might refuse to allow overflights. This could disrupt connections to Asia, India, and the Middle East.

In an emergency situation, it is impossible to travel to Russia. We must fly south,” Yuji Hirako said, chief executive officer of All Nippon Airways Co Ltd.

According to a letter from Reuters, U.S. airlines asked the State Department in October to act urgently to obtain additional rights to fly Russia. The U.S. is expected to meet with the carriers in the next few days.

One leasing executive stated that Russia is a bright spot for the aviation leasing industry. During the pandemics, the payments have been relatively consistent.

Leasing companies had bigger risks in Russia even though some airlines were beginning to leave Ukraine.

Chief executive at lessor Avolon Domhnal Slattery stated that his greatest concern was about the possibility of sanctions against SWIFT which could disrupt international payments transfers.

He said, “So we are focused on making sure that we have the ability to get around it from our perspective regarding payment of rentals.”

According to Cirium, Russian companies currently have 980 passenger planes in use, of which 777 can be leased.

Two thirds of these jets (or 515) are rented to foreign companies, which has an estimated market worth about $10 billion.

Rob Morris (head consultant at Ascend by Cirium) stated, “If sanctions are placed on Russian companies, these could have an impact of more than 500 aircraft, if any exemptions are permitted.”