Airspace Closures Send Airlines On Detours, Add To Cargo Woes

Airlines on Monday braced for a potentially lengthy sanctions war after the EU banned Russian airlines and Moscow pledged to retaliate.

Dozens of flights were cancelled or sent on costly detours as the crisis hit airline shares.

The rerouting meant Kazakhstan's airspace saw a tripling of flights to more than 450.

Airline industry executives said they were expecting Russia to ban their use of routes crossing the country after the European Union on Sunday banned Russian airlines as fighting raged in Ukraine.

On Monday, the Kremlin said there would be a response to Western sanctions against Russia's aviation industry.

"The guiding principle will be reciprocity, and our own interests will be at the forefront of that," Kremlin spokesperson Dmitry Peskov told reporters on a conference call.

Without access to Russia's airspace, carriers will have to divert flights south while also avoiding areas of tension in the Middle East.

Shares in European airlines and airport operators were down 3-6% in early trade, while Finnish national carrier Finnair cut its guidance and saw its shares tumble 23%.

Germany's Lufthansa said 30 flights to Russia would be cancelled this week by Lufthansa and its subsidiaries Eurowings and Austrian Airlines, while Latvia's AirBaltic said it was extending its suspension of flights to Russia until the end of May.

Lufthansa said its flights from Europe to Tokyo and Seoul would have to fly detours for which the company had secured necessary flight rights.

In Asia Singapore Airlines said on Monday it was suspending all services between Singapore and Moscow until further notice for "operational reasons".

Finnair scrapped its 2022 guidance, fearing significant loss of business as it uses a route across Russian skies from Europe to Asia via its hub in Helsinki.

Korean Air, Japan Airlines and Japan's ANA Holdings said on Monday they were continuing to use Russian airspace but had no plans to add flights to Russia or Europe to replace flights cancelled by European carriers.

Demand to Japan and South Korea has been low due to COVID-related travel restrictions.

Airline Swiss, also owned by Lufthansa Group, said it would continue to fly to Russia as Switzerland has not banned Russian airlines.

MORE SUPPLY CHAIN DISRUPTION

Airspace shutdowns and flight cancellations will also set to affect cargo traffic, further exacerbating global supply chain woes caused as the pandemic slows cargo handling worldwide.

"Due to the ongoing dramatic developments in the Russia-Ukraine conflict, Lufthansa will no longer use Russian airspace," Lufthansa Cargo said.

U.S.-based United Parcel Service Inc and FedEx Corp, two of the world's largest logistics companies, said they were halting deliveries to Russia.

Global aircraft also lessors said they would have to terminate hundreds of plane leases with Russian carriers in the wake of EU sanctions that call for such contracts to end by March 28.

Russia's Aeroflot said on Sunday it would cancel all flights to European destinations after EU foreign policy chief Josep Borrell said the EU had decided to close its airspace to Russian traffic.

The United States is considering similar action, but has yet to make a final decision, according to U.S. officials.

The U.S. government said on Sunday citizens should consider leaving Russia immediately on commercial flights, citing an increasing number of airlines cancelling flights as countries close their airspace to Russia. [L1N2V307H]