Russia-Georgia ban on direct flights takes effect and set to impact both countries

No post image

The Russia-Georgia ban on direct flights took effect from yesterday (8 July) and will cause economic harm to both countries, according to Swiss-based aviation economic and strategy firm Veritas Global.

The company said Russian airlines, which offer 76 per cent of the capacity, will be worst impacted and stand to lose $225 million in revenue per year while Georgian airlines will face revenue losses of $61.3 million.

On 21 June this year, Russian President Vladimir Putin issued an executive order prohibiting Russian airlines to carry passengers from Russia to Georgia starting 8 July. This was followed by a statement from the Russian Ministry of Transport indicating that Georgian airlines will not be allowed to land in Russia.

“The proposed ban will have negative consequences for both countries, but Russian airlines stand to be impacted the worst,” said George Anjaparidze, Veritas Global chief executive officer and former IATA senior economist. 

Veritas Global said visitors from Russia, which make up about 82 per cent of direct travellers, will experience a loss in consumer welfare of $63 million per year compared to $13.6 million in losses for travellers from Georgia. These losses are explained by a combination of longer travel time for diverted passengers and having to settle for less suitable substitutes for discouraged travellers.

“We expect 63 per cent of the Russia-Georgia direct air travel market to be diverted to other regional hubs such as Minsk, Riga, Almaty and Istanbul. That is a significant inconvenience to those passengers that prefer to fly direct,” said Anjaparidze. 

Veritas Global also said tourism spending will also be impacted. Georgia can expect lower tourism spending of $111.5 million per year due to a reduction in passengers from Russia. Spending in Russia by Georgian tourists will also decline, resulting in a reduction of $28.9 million.

More details of the analysis can be found here.