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Business

MH17 One Year Later: Who’s Paying for the Downed Aircraft

A year has passed since the tragedy near Donetsk. On July 17, 2014, a missile downed a Malaysia Airlines Boeing 777 with 298 passengers on board. An investigation into the downing of Flight MH17, led by the Netherlands, is not yet complete, with Russia, Ukraine, the Western countries and independent investigators disagreeing on almost all of the key issues. The political fallout from the incident will be dark and ongoing, but the economic consequences have become clear very quickly. Airlines were forced to abandon the once profitable transit route through Ukraine. Flying between Europe and Asia has become longer and more expensive, but airlines still have to fly. The loss of Western air traffic has cost Ukraine as much as $200 million in annual revenues.

According to one pilot acquaintance, «do we fly over Ukraine?» is one of the most common questions from passengers. The West-East flight path over Ukraine, extremely popular with all the major airlines in Europe and Asia, is now closed.  According to the European Organization for the Safety of Air Navigation (Eurocontrol), 350 of the 500 flights operating daily over Ukraine were transit flights. The answer to passenger queries is that airlines definitely do not fly over eastern Ukraine (Donetsk) – the airspace is closed. But in the rest of Ukraine, airlines fly to local destinations and Ukrainian cities, for example Moscow-Kiev. There is a small percentage of transit flights on North to South routes, from Sweden, Norway, and Russia to Turkey and back.

In February 2014, air traffic over Ukraine grew rapidly, thanks to the Sochi Olympics. In March and April, after the situation involving Crimea took a turn for the worse, planes from Europe to Asia and back to Ukraine continued to fly at high altitudes. Given the fighting and the fact that several military aircraft and helicopters had been shot down, Ukraine’s aviation authority closed airspace up to an altitude of 9750 meters. Both the US and Europe warned airlines to avoid flying over Crimea and eastern Ukraine. However, the warnings were advisory in nature since the dedicated aviation organizations have no enforcement authority.

Some carriers began to circumnavigate the danger zone, but not all. On July 17, 2014, Malaysia Airlines was not the only passenger flight to cross Eastern Ukraine. Several days after the tragedy, the Russian Defense Ministry noted that at the same time (17.10 – 17.20), three other aircrafts flew similar routes and altitudes on flights from Copenhagen – Singapore, Paris – Taipei, and New Delhi – Birmingham. The three other flights located near the Malaysian B777 were mentioned in the preliminary report from the Security Council of the Netherlands.

Why were civilian aircraft flying in a war zone? After the crash of MH17, this question remained, along with other critical questions including whose missile and who launched it? First, let’s understand the procedures. Closing airspace over «hot spots» is a common practice, as was done several times in the cases of Libya and Iraq. Flight restrictions are announced by each country’s aviation regulatory body (or other government entity), which issues a NOTAM (NOtice To AirMen) detailing changes in the rules of flight conduct and security. The document is communicated to the airlines, including through the International Civil Aviation Organization (ICAO) and Eurocontrol. Routes are then planned based on this information. As already mentioned, Ukraine announced that its airspace was closed up to 9750 meters. Flight MH17 was flying at an altitude of 10,000 meters; Malaysia Airlines was acting in accordance with regulations.

And what’s the basis for NOTAM? In 1990, after the US Navy shot down an Iranian passenger jet, the ICAO published “Guidance on Safety Measures in Connection with Military Operations.” Although it’s a recommendation, it should have been followed in Ukraine.

In short: 1) at a minimum, even in the event of only hypothetical danger — close the airspace; and 2) the decision-making responsibility rests with the State. Eurocontrol CEO Frank Brenner entirely agrees, adding only that ‘airlines are in charge of making decision on routes too.’

The question remains why Ukraine’s aviation regulator and carriers underestimated the risks (which in the case of Malaysia Airlines turned into a tragedy). Perhaps, compared to Iraq, Libya, Syria, and Afghanistan, Ukraine doesn’t look so threatening – after all, it’s still Europe. And who knew there was a weapon effective at such an altitude? This is why no red flags were raised. Oleg Storchevoy, deputy head of Rosaviation (the Russian Aviation Authority), categorically states that Ukraine didn’t want to lose a significant amount of money by closing airspace. However, the financial interest was mutual for Ukraine and carriers alike.

For transit over the country, Ukraine earned income by providing air navigation services. However, the amount of revenue has never been disclosed.  Let’s try to estimate. The data for the calculation include: 350 transit flights per day (Eurocontrol); the Ukrainian part of the route is 1500 km at $1 per km (this figure is from an employee of a cargo airline that flies through Ukraine). That totals nearly $190 million annually. A figure close to this number appeared in the Washington Post.

It’s also been said that Ukrainian airspace was not completely closed due to alleged pressure from the airlines flying East-West routes, as flying across Ukraine was the most convenient route. The detour adds nearly 500 km (310 mi). According to carrier KLM, the overall cost is an average of $2000 per 100 km, with the detour adding an additional $10,000 in costs. «Shipping costs have increased», noted the cargo airline employee. «We’ve passed these costs on to customers». By the same logic, passenger carriers are likely to follow a similar course of action as they adjust rates to the new reality. 

Airlines fly around Ukraine through neighbouring countries, where traffic has increased — Bulgaria by 48%, Romania by 25%, Turkey by 21% and Hungary by 20%, according to Eurocontrol. The forecast suggests that preconditions for the return of air traffic to Ukraine will not be in place until at least 2021 – the map of overflight routes existing after July 17, 2014, is very likely to remain in place. Meanwhile, Malaysia Airlines has renamed its Amsterdam-Kuala Lumpur flight MH19 and put a thick red line on the map over Crimea and Ukraine.

«Society has already decided who is guilty»

The main issue connected with the tragedy of MH17 lies ahead — compensation for the relatives. A year later, with emotions calmed to some degree, the victims’ families have become more active. They’re certainly asking questions of the authorities in their respective countries (the passengers were from the Netherlands, the UK, Australia, Malaysia, Germany, Belgium, Indonesia, the Philippines, Canada, and New Zealand). When will the investigation be complete? When will the guilty be called to account? But the courts and law are one thing and public opinion quite another.  «In law, there’s a presumption of innocence, but in public opinion there’s a presumption of guilt – prove you’re not guilty», says Alexander Baunov, editor-in-chief with the Moscow Carnegie Center. — «Society has already decided who is guilty».

After Time magazine published an illustration of Putin in the shadow of the Boeing 777, a conclusion seems to suggest itself.

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Immediately after the disaster, there were many articles about possible compensation. There was a «standard» of $150,000, discussed, with claims up to just under $1 million per passenger also mentioned. Compensation will take time, with the question of who will pay arising.

And here it is important to respond. The International Tribunal will not allow the MH17 story to remain at the «regional» level, which means there’s a greater chance of completing the investigation (six countries voted in favor). Russia and Putin personally came out against the UN tribunal. «I do not understand why Russia does not agree — it’s contrary, it would be possible to show and tell everything», says Baunov. But the ‘guilty’ atmosphere is likely responsible, and in general, the goal is “not to cave in,” he adds. On the one hand, Russia, as a permanent member of the UN Security Council, has special status — and without its participation a Tribunal can’t be created. On the other, there is the risk that such stubbornness will lead Russia to drive itself into a corner – another authority could be created, without Russia.

And the lawsuits have already begun; on July 16 a suit was filed in a Chicago Court on behalf of 18 families of the victims against Russian citizen Igor Strelkov-Girkin (the rebel’s leader at the time MH17 was shot down) for compensation in the amount of $900 million. Demand is low in part because airlines are dealing with the effects of Western sanctions and depressed oil prices: passenger traffic decreased by 1.2 percent from 2014 to 2015 and has fallen by 3.6 percent in the first four months of 2016.

Russian version published by Forbes Russia

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