Airspace closures following the war of aggression in Ukraine: The impact on Europe-Asia airfares

Abstract

The Russian war of aggression in Ukraine and subsequent sanctions imposed by Western countries has resulted in the withdrawal of overflight rights over Russian territory for most Western airlines. On Europe-Asia routes, this causes substantial detours for European airlines and, in turn, increases travel times and operational costs. This paper investigates the impact of the Russian and Ukrainian airspace closures on airfares between Western Europe and Asia. To identify a causal impact, fares on affected routes from Northern Europe are compared with fares on similar unaffected routes from Southern Europe using a difference-in-differences approach. The results show that the airspace closures increase fares for Europe-Asia flights from European airports above the 50th degree of latitude. On average, the fare effect for these flights is USD 43. Furthermore, the findings indicate that, in general, for each additional minute of flight time due to the airspace closures, fares increase by USD 1.56.