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5 Aug, 2014 08:29

Medvedev: Russia to consider retaliation to EU sanctions

Moscow will consider possible responses to the EU sanctions against Russian airlines, Prime Minister Dmitry Medvedev has said.

READ MORE: Russia sanctions could jeopardize Britain’s economic interest – JCB chief

“A topic I would like to discuss concerns the consequences of the decision a number of governments have taken in relation to our carriers. We need to discuss possible retaliation,” the Prime Minister said at a meeting with Russia’s Transport Minister Maksim Sokolov and the deputy director of Aeroflot, Vadim Zingman.

On Tuesday, Vedomosti daily reported Russia was considering limiting, or even completely blocking European flights to Asia that cross Siberia, in response to EU sanctions that caused Aeroflot subsidiary Dobrolet to suspend flights on Monday.

Another newspaper source close to the negotiations said the recent halt of Dobrolet flights, as well as Ukraine’s fees for Russian flights to Crimea, have accelerated the talks. Discussions started shortly after the EU introduced its first round of sanctions against Russia.

READ MORE: Sanctions force Aeroflot pull plug on low-cost airline

A person close to the Ministry of Foreign Affairs said that “any unfriendly measures by the EU, including those in the area of air transportation, we’ll be studied and won’t remain without a response.”

Most nonstop flights between Europe and Asia cross through the Siberian Federal District, which saves airliners at least 4 hours in flight time to Tokyo, Japan and Seoul, South Korea. The deal was made in the 1970s under Soviet rule, and saves air carriers about $30,000 per flight.

British Airways, Air France and Lufthansa are the biggest EU airlines. Lufthansa said it could potentially lose more than €1 billion in three months if it does not use trans-Siberian routes, according to Forbes.The three air carriers told RT they weren’t commenting on a possible block on European flights as they don’t have any information.

The shortest route from Europe to Asia crosses Russian Siberia and Western airlines pay Aeroflot a fixed fee or “overflight charges” for such routes.

Blocking flights by Western airlines over Siberia would add on average an hour and a half to the travel time, Oleg Panteleev, head of the analytical department of the Aviaport agency told Vedomosti. It will result in higher fuel and labor costs, and more strain on technical equipment.

Aeroflot, in turn, has already seen its stock price fall over 40 percent this year, and stands to lose $200 million in such charges, according to airline experts. Losing this revenue could drive the airline into the red.

The airline’s net profit in 2013 was $203.3 million, which should be compared to the $170 million it received from Siberian airspace fees, Bloomberg News reported.

Other countries have overflight fees, but they usually go to the national aviation administrator, and not an airline. The US currently charges $49.95 for all flights that fly over US territory. Aeroflot doesn’t disclose exactly how much it makes foreign airlines pay.

“The talk is of good revenue. One needs to consider all the pros and cons in order not to assimilate the Americans and the Europeans, in fact hammering on our own heads,” said Presidential Press Secretary Dmitry Peskov.

Russia agreed to phase out the traditional royalty collection by January 2014, and make them more cost-related and transparent, but escalating political tensions could derail the plan.