Scott's Cheap Flights Founder and Chief Flight Expert Scott Keyes joins Yahoo Finance Live to discuss how airspace restrictions on Russia by European countries may impact international travel, the potential for rising jet fuel prices to affect consumers, and the outlook for the aviation supply chain.
- Welcome back. European nations and Canada shut their airspace to Russian aircraft over the weekend. And Moscow quickly retaliated by prohibiting Western airlines from its space. What does it mean for the airline industry and for travelers? Let's bring in Scott Keyes. He is founder and chief flight expert at Scott's Cheap Flights.
So Scott, there's some talk now among industry folks that this could be a return to Cold War travel. Higher prices, longer flights, refueling in Alaska. What are your thoughts on that?
SCOTT KEYES: Yeah, I don't think that's quite going to be the case. It certainly could be the case for folks who are hoping to visit Russia or nearby countries. But for most areas of travel, you're not going to see an immediate direct impact from these airspace restrictions yet.
Now, for flights if you're hoping to go to Asia or places-- excuse me-- nearby where the conflict is happening, I think you will see an immediate impact from that. But for most folks who are hoping to travel to Western Europe, domestically, Western hemisphere, you won't see quite any type of major impact to your specific travel plans.
- Now, the US, I guess, has been slower to act than its allies, its airspace still open to Russian aircraft and vice versa. But what if that were to change? How does that complicate things for travel?
SCOTT KEYES: Yeah, my sense is twofold here. One is that I don't think it's necessarily indicative of a slower to act mentality, in large part because I don't think they're going to be many flights from-- between the US and Russia any time soon, considering that all of Europe and Canada has closed their airspace. There's just not a good way for most Russian aircraft to come to the US.
Secondly, there is talk that this could be coming imminently, that the US could be shutting its airspace to Russia. And I would expect Russia to retaliate by closing its airspace as well to American aviators in the same way that it has for European and Canadian airlines.
And the result of that is that if you are flying to Asia or somewhere else, currently, or at least as of last week, most of those flights transit Russia. It's the quickest way. For instance, a nonstop flight from New York City to New Delhi, let's say, in India goes directly over Russia. Those types of flights will likely have to reroute, have a technical stop in somewhere like Istanbul or Dubai en route. And that's going to mean a longer flight, more connections, more pilot hours, and likely, a higher price for those flights.
- And I know that the US embassy in Russia did tell US citizens there to consider leaving, you know, to avoid being stranded. So perhaps they already see the writing on the wall. I want to talk, though, about oil prices skyrocketing and what that means for the industry. I know the travel industry was starting to recover quite nicely during the pandemic. Jet fuel is, I think, the second highest cost behind labor for these carriers.
What are these high oil prices going to do? And are they going to pass that along to us in the form of higher ticket prices, Scott?
SCOTT KEYES: That's right. Look, this is just one thing after another for the airlines. Because you nailed it exactly right. That the price of jet fuel is the second highest expense for airlines after labor costs. And in some cases, if it gets high enough, it can become the most expensive cost for airlines, as it did in the '07, '08 oil crisis.
Will that get passed on to consumers? If it sustains at a high level, it absolutely will. Now, if it's more of a blip, if things work out that the price of oil comes down sooner rather than later, I think the impact for individual travelers and ticket prices will probably be minimal. But if the price of oil stays above $90 or certainly above $100 a barrel for the foreseeable future, there is no way around that showing up in higher ticket prices.
And the reason why is that there's no airline that doesn't rely on jet fuel to fly its planes. They are all exposed to the price of oil. Even if they maybe bought oil for the next few months, they've already locked in their price now. This is why a sustained high price of the cost of oil is something that would need to happen for it to show up in a material way for travelers.
- And Scott, also if this war is prolonged, you say it could be felt in the airplane supply chain. Tell us about that and its impact on the industry and possibly to us as travelers.
SCOTT KEYES: That's right. Look, if we enter a new Cold War or something along those lines where there is significantly diminished trade between Russia and the West, that is going to have a major impact on aviation supply chains. Let me give you an example. The landing gear for many of the wide body jets used by Boeing and Airbus and others is sourced through Russian titanium. And that titanium is critical for building new airplanes.
And yet, their supply chains are not exactly diversified at the moment. They're wholly reliant on a couple of different Russian companies. And so a prolonged war, prolonged interruption of trade, could really start to show up in airplane production over the next few years.
Will that come to pass? I think it largely depends on the course of the war, the course of the invasion. But this is something that I can guarantee you executives at Boeing and Airbus are monitoring closely and thinking about how to proceed moving forward.
- So many forces at work there for the airline industry that's already been through so much during the pandemic. Scott Keyes, founder and chief flight expert at Scott's Cheap Flights. Thanks for being here.