Supply chain on watch as U.S. imposes airspace ban on Russia
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Following in the footsteps of the EU and Canada, President Biden has announced a ban on Russian aircraft and airlines entering American airspace due to Moscow's invasion of Ukraine. According to Western military officials, the war is now crossing into a new phase, with Russia turning to heavy artillery and the indiscriminate shelling of civilian neighborhoods. The more destructive stage even prompted Ukraine to sell $270M worth of war bonds overnight, ahead of a planned siege on the capital of Kyiv.
Quote: "We will join our allies in closing off American air space to all Russian flights, further isolating Russia, and adding an additional squeeze on their economy," Biden said in his first State of the Union address. The ban, which will take effect by the end of today, will prohibit any plane owned, certified, operated, registered, chartered, leased, or controlled by, for, or for the benefit of a person who is a citizen of Russia from flying over the U.S.
Russia is expected to retaliate with similar measures and may even go after Boeing (NYSE:BA), a major American exporter and one of the world's two leading aircraft manufacturers. While U.S. carriers don't operate any non-stop flights to Russia, its airspace is part of a key corridor for many long-haul flights to Asia. United Airlines (NASDAQ:UAL) typically flies over Russia en route to India, while Delta (NYSE:DAL) and American Airlines (NASDAQ:AAL) already suspended flying over Russian airspace earlier this week.
Go deeper: Russia is said to derive a significant amount of money from the fees it imposes to use its airspace, or to land at one of its airports. The new ban will also affect the lucrative air-cargo services markets, impacting operations of carriers like FedEx (NYSE:FDX) and UPS (NYSE:UPS). In fact, cargo flights between Asia and North America account for a quarter of global freight traffic, according to the IATA, putting the supply chain on watch once again.
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