Policy Pulse - 8 July 2019 - George Anjaparidze
On 8 July 2019 the ban on direct flights between Russia and Georgia went into effect. As quantified in our previous assessments, Russian airlines will be worst impacted and stand to lose $225 million in revenue per year (See our analysis Why harm Russian airlines and consumers?).
As an immediate response, the Russian government has offered to compensate Russian airlines for revenue losses. However, the budgetary support allocated to-date for airline compensation would only be adequate to deal with the initial loss in revenues.
In the absence of direct flights, 63% of air travelers will be diverted to other regional hubs such as Minsk, Riga, Almaty and Istanbul. The air travel market to and from Georgia is one of the fastest growing markets in the world. If the ban is to persist, losses in revenue to Russian airlines will mount.
Consumers will also be negatively impacted. Longer travel time and less suitable travel substitutes will reduce consumer welfare, with largest negative impacts expected to be felt by Russian consumers. Spending by tourists in Georgia will be lower by $111.5 million compared to lower tourism spending of $28.9 million in Russia (See our analysis Russia-Georgia ban on direct flights will harm both countries).
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