Russian President Vladimir Putin's invasion of Ukraine has hurt Finnair's operations. Photo: MIKHAIL KLIMENTIEV/POOL/AFP via Getty Images
Russia's war in Ukraine is a humanitarian and political crisis. It's also a nightmare for business in the region.
“War in Europe is hell,” says Topi Manner, chief executive of Finnair. «But in terms of corporate life, we've been to hell and back.»
With Russia just over 100 miles from Helsinki, the presence of the Red Army on the doorstep is something the average Finn has to put up with for decades .
All male Finns are required to complete military service after they turn 18. , a legacy of paranoia about the country's neighbor.
Vladimir Putin's invasion of Ukraine not only added to this anxiety, but also made the situation unbearable for Manner, chief executive of the country's flagship airline.
Finnair is the largest Scandinavian airline and one of the largest in the world with bases in London, Manchester and Edinburgh.
However, the closure of Russian airspace after the start of the war undermined her business and, at worst, forced Manner to stare into the abyss.
“In the darkest moments … it was not taken for granted that we survived,” he says .
Finnair CEO Topi Manner says the airline has «been to hell and back» since Russia. invasion of Ukraine. Photo: Holly Adams/Bloomberg
Few would argue that Manner has the toughest job in the world of aviation. Russia surrounds Finland: from the east, and also surrounds the country from the north and south.
Therefore, the closure of Moscow-controlled airspace as part of economic sanctions against the Kremlin was devastating for Finnair. This forced the carrier to fly around a huge landmass, which increased the cost and number of hours of flight.
The flag carrier has previously used geography to its advantage, carving a niche, operating shorter flights between Europe and Asia, circumnavigating the Arctic Circle and crossing Siberia .
Flight times between Asia and London — even with a stopover in Helsinki — were comparable to comparable direct British Airways flights.
“The closure of Russian airspace hit right in the middle of that strategy,” Manner says. “So we needed to completely change what we have been successfully creating for over 20 years.”
To understand how devastating this was, look at flights to China. The flight between Helsinki and Beijing took approximately nine hours over Russia, but now takes up to 14 hours.
Worse still, some destinations are now out of reach for Finnair aircraft due to the long distances required to reach them. Eight Airbus A330 Finnair aircraft — a tenth of the airline's fleet — no longer have range to certain Asian destinations.
Since the ban, a tenth of Finnair's fleet can no longer fly to certain Asian destinations. Photo: iStock Editors
It's not just Russian airspace that's closed. So does the skies over Belarus and, of course, Ukraine.
Costs on some Finnair routes have doubled, mainly due to the need for additional fuel, but also as a result of the additional labor needed for extended flights . travel.
The crisis came just as another was ending: two years of Covid travel restrictions that brought international travel to a halt.
Manner, a former banker with no aviation experience, took over Finnair just over a year after the pandemic began.
After Putin invaded Ukraine, he was forced to rethink Finnair's business in order to stay alive. The carrier began flying to the Middle East in partnership with Qatar Airways. In the meantime, additional routes have been laid out west, to Texas and Seattle, for example.
“We have completely upgraded our network,” says Manner.
Wet leasing has also proven to be a useful source of income. Finnair leased its crewed aircraft to other airlines to help them operate their flights.
This led air monitors to spot Finnair aircraft in unusual places.
Some airlines & #39; damaged A330s are being leased to Qantas under a five-year contract, a sign that Finnair does not expect the war in Ukraine to end anytime soon. This means that some of Finnair's crew will be stationed in Singapore to serve flights to Australia.
Meanwhile, British Airways has borrowed several Finnair A320s for short-haul flights across Europe. As a result, the crew, who used to return to Finland after the flight, are now forced to sit at Heathrow for weeks.
There are indications that the Manner overhaul is working. Finnair made a small profit in the first three months of 2023.
However, the share remains at half pre-pandemic levels and is unlikely to recover until Russian airspace reopens. (Finnair is 55% owned by the state, with the rest listed on the Helsinki Stock Exchange.)
The West's decision to ban flights over Russia was partly about security. Airline executives fear a repeat of the downed Malaysian airliner MH17 in 2014 as it flew over rebel-held Ukraine. Russian separatists were found responsible for the tragedy that killed 298 people.
However, the flight ban was also intended to deprive Russia of a revenue stream to fund Putin's war effort.
Russian separatists were convicted of downing Malaysian Airlines Flight MH17 in 2014. Photo: Antonio Bronik/REUTERS
In 2019, the country earned $1.7bn (£1.4bn) in overflight fees — a pittance compared to Russia's oil revenues, but money that could nonetheless be used to make bombs and weapons .
While Western airlines like Finnair are watching the boycott, it's not global.
Chinese carriers, for example, continue to reap the benefits of shorter flights to Europe.
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Air France is reportedly pushing to ban any incoming airlines that fly over Russian airspace. Meanwhile, Virgin Atlantic has emerged as the leading voice in the UK calling for restrictions on Chinese carriers landing in the UK.
Manner believes Europe is unlikely to take a hard line on the issue, despite lobbying efforts.
p>“To agree that there is no level playing field and that Chinese carriers continue to use Russian airspace seems to be the approach Europe is currently taking,” he says.
The US is taking a tougher stance, with US authorities only allowing Chinese carriers to operate 12 weekly flights to America.
Manner adds: “Theoretically, there could be a possibility that European authorities will restrict Chinese carriers [for example, the US] – but we we do not see this happening at the moment.”
Russian airspace is used not only by Chinese airlines. Qatar Airways, Etihad, Emirates and Turkish Airlines also fly to the country, violating Western sanctions.
This may be why the leaders of older European airlines do not want to publicly condemn competitors who use shorter Russian routes.
Qatar, for example, is part of the Oneworld alliance, which includes Finnair. The Middle East airline is also the largest shareholder of British Airways-owned IAG.
Manner says: “It remains to be seen how this level playing field issue will develop. And my personal hypothesis is that the US and China need to sort out their bilateral relationship first. After that, Europe can follow suit.”
In Asia, Finnair is struggling to compete on price with Chinese and Indian carriers that still fly through Russia.
“We have kept our positions in Asia, flying to Asian metropolitan areas [such as] Tokyo, Shanghai, Hong Kong and Singapore,” he says.
However, pent-up travel demand has allowed the airline to survive in the region and get past much of the higher costs incurred customers by charging higher rates.
“In the end, we hope that there will be real peace in Ukraine with conditions that Ukraine can accept,” Manner says.
“And once that happens, we believe that the opening of Russian airspace should be one of the first sanctions to be lifted. Because it has a huge impact on all air travel around the world, not to mention emissions.”
He adds: “Unfortunately, this is not planned in the near future.”
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