March 4, 2022
The numerous ways the escalating hostilities between Russia and Ukraine have already impacted the global business aviation community, and likely ramifications as the crisis evolves in the weeks and months ahead, were the subject of a timely NBAA News Hour webinar held March 4.
The webinar, moderated by NBAA President and CEO Ed Bolen, was sponsored by UAS International Trip Support.
John Tuten, chief pilot for Honeywell and chair of the NBAA International Operations Committee, noted closure of Russian airspace has impacted roughly half of all routes between the U.S. to India and the Asia-Pacific. “In some instances it’s adding five hours of flight time” to divert around the closures, he said.
Although not a large petroleum provider to the U.S., sanctions against Russian oil shipments to other countries will also carry significant consequences to the global market. “Our economists have started modeling scenarios [at] $150 a barrel,” said David Granson with Goldman, Sachs & Co., due to anticipated international supply chain shocks, coupled with high demand as travel returns to pre-pandemic levels.
Ron Epstein, senior equity analyst for Bank of America, said he expected other supply chain shortages as well, particularly as Russia is among the largest global suppliers of titanium and other materials used in aircraft production. “If you’re doing business with these folks, you have to be really careful given how the sanction environment is changing, quite literally, almost by the hour,” he said.
International sanctions against Russia also will affect aircraft transactions. “If you buy an aircraft that was owned by a blocked entity, the government’s going to seize it and start a forfeiture procedure,” cautioned Jonathan Epstein, partner at Holland & Knight LLP. “You better have documented that you did [your due] diligence and were a buyer in good faith.”
Cyber-attacks against Ukraine and members of the North Atlantic Treaty Organization (NATO), including the U.S., also are likely. Granson noted one cybersecurity firm recently discovered “wipers … targeting the ministries of the Ukrainian government to effectively wipe them out, shut down communications [and] take over the power grids.”
Despite these challenges, financial analysts remain generally optimistic about the global economy and the business aviation market. “We’re still bullish on business aviation,” said Ron Epstein. “Ultimately, the Russian economy is about the size of Spain. It’s a player, but it’s not like China.”
“We’re very constructive on growth around the world,” agreed Granson. “It’s a scary time, but we do believe we’re going to finish the year better than where we started from a business perspective and economic perspective.”
Bolen added: “This is a snapshot in time. We’re grateful that our community is always able to put forward experts that understand complex issues that help us, articulate those to our members and help [NBAA] be a resource.”