Ukraine crisis briefing

Revenue impact

With no end to the conflict in sight, fuel prices will continue to surge for airlines. This will negatively impact their bottom lines, unless they pass the full additional cost on to the traveller, which could reduce demand in an industry where consumers can easily find substitute services.

For example, American Airlines is forecasting fuel costs to increase between $3.92 to $3.97 per gallon, increasing $0.33 per gallon from the previous estimate of $3.59 to $3.64. Increasing fuel costs means that airlines cannot optimise performance and their post-Covid-19 recovery timelines will be extended as a result. 

Aeroflot, Russia’s flagship airline, has seen its revenue cut dramatically. It is now planning to raise up to $3bn in an emergency share issue.

Key Travel And Tourism  developments

SANCTIONS

In 2022, Thailand is set to fully reopen its borders to international tourists with no need for a negative pre-departure PCR test. Additionally, it has not placed any restrictions on Russia concerning the ongoing geopolitical crisis with Ukraine and has a tourism product that is naturally attractive to Russian travellers. These factors will likely combine to create a stiff year-on-year increase in Russian visitation to Thailand in 2022.

In May 2022, Thailand’s Minister of Commerce stated that Thai banks had displayed interest in Russia’s proposal to introduce the MIR payment system for Russian travellers in Thailand and pledged to coordinate with the appropriate Tourism and Transport ministries to facilitate direct flights from Russia

Luxury cruise company, Tradewind Voyages, which operates the Golden Horizon, has paused operations due to sanctions against Russia. The company has been impacted by sanctions placed on its major lender VTB bank, which has its headquarters based in Russia. This shows that travel and tourism companies may still be heavily impacted by sanctions indirectly, even when they have no physical presence in Russia and Ukraine.