How Malaysia Flight MH17 Became a Financial Windfall for Russia.

There a fascinating piece from Aerotime explaining the consequences of avoiding flights over Eastern Ukraine.

Following the MH-17 crash near Donetsk in July 2014, the Ukrainian and international aviation authorities promptly reviewed their safety recommendations and closed the airspace over Simferopol and Dnepropetrovsk FIRs. Though some airlines had started re-routing their flights several months before the official restrictions came into effect, the crash and the subsequent complete closure of the air over the Eastern parts of Ukraine have led to a significant drop in the overall number of flights over the Ukrainian territory.

This change is costly to airlines because of the increased fuel burn flying around the territory, and it’s a financial windfall for neighboring countries because airlines have to pay to overfly them.

The interesting part here isn’t the longer flight times which means more fuel and more cost.

The interesting thing — and this issue is outside my personal areas of expertise, which is also what makes it fascinating to me — is the unintended consequence of more money neighboring countries primarily Turkey and Russia but also even Iran. Iran issued 32% more overflight permits year-over-year.

But for the Ukrainian aviation authorities the existing restrictions translate into 140-160 million EUR losses in revenues, according to the Ukrainian State Air Traffic Services Enterprise (UkSATSE). The Ukrainian aviation agency states that in 2014 due to the closed Simferopol and Dnipropetrovsk FIRs its annual income might have dropped by 70-80% (compared to 2013).

…So where will the money go to? Bulgaria, Romania, Iran, Turkey and Russia. Actually, the latter two will grab the larger portion of the pie, since approx. half of the aircraft which used to fly over Ukraine are now daily re-routed via the North (Russia) or the South (Turkey), according to Eurocontrol data.

Russia apparently charges 83 euros per 100 kilometers flying through their airspace — an amount higher than what they were charging prior to the MH17 incident.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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