The brewing Ukraine-Russia conflict can prove very costly for the airline industry.
Days after U.S. and Canada ordered most diplomats out of Ukraine amid heightened risk of Russian invasion, insurance companies also started pulling the plug and refusing to cover Ukrainian airspace.
On Monday, Ukraine International Airlines told local news outlets that it received “an official notification from insurance companies to terminate the insurance of aircraft for flights in the airspace of Ukraine” over concerns of imminent invasion from Russia.
While Ukraine has been in a semi-permanent state of war since Russia annexed the island of Crimea in 2014, tensions have reignited after Western countries like the U.S. and the United Kingdom reported a buildup of Russian troops around the Ukrainian border dating back to the fall of 2021.
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What Is The Ukraine-Russia Conflict?
White House national security advisers are placing the number of Russian troops around the eastern European country at 130,000 and warning that Russia could invade “essentially at any time.”
Western governments have either pulled their diplomats from Ukraine entirely or moved them further to the West of the country over the last few weeks.
While Russia’s government has repeatedly denied that it is planning an invasion and maintained its right to maintain troops on any part of the country’s territory, past annexation and ongoing Russia-supported separatist unrest in two of Ukraine’s eastern regions have put many in a perpetual state of fear over Russia’s intentions for its neighbor.
Despite the West’s warnings over the current situation, Ukraine’s government has repeatedly tried to play down panic and say that an attack was no imminent.
By Monday, Dutch airline KLM (KLM) had suspended flights to Ukraine and through the country’s airspace, while German airline Lufthansa (DLAKF) and British airline British Airways British Airways were considering similar suspensions.
While Ukraine’s Infrastructure Ministry said that “most airlines continue to operate without restrictions,” the insurance companies’ pullouts risk wreaking serious havoc.
Not only will the country’s airline industry be affects, but also thousands of flights that pass through the airspace on the way to other European countries and beyond each week will be affected.
What Happens Now That Insurance Companies Are Pulling Out?
To maintain the flow of airplanes going through its airspace, Ukraine’s government allocated 16.6 billion hryvnia (US$592 million) toward insurance costs independently.
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But with more airlines pulling out or reconsidering routes, the cost of flying through Ukrainian airspace may become too much of a risk for airlines or insurance companies to take on.
Another Ukraine-based carrier, SkyUp Airlines, was recently forced to land a plane flying over 170 passengers from the Portuguese Island of Madeira in Moldova instead of Kyiv, after the Irish company that leases its jets deemed it unsafe to go into Ukrainian airspace.
“Negotiations with insurers have been difficult, and our foreign partners continue to regularly assess their own risks and monitor the situation,” SkyUp’s CEO Dmitriy Seroukhov said in a statement on Monday.
