Russia continues to ignore agreement to remove Siberian overflight charges

Finnair pays Aeroflot EUR 20 million per year in compensation

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The late autumn 2006 summit agreement between the EU and Russia on the removal of overflight charges from European airlines using Siberian airspace on routes to Asia is a dead letter in an agreement that continues to remain unratified. Immediately in the spring of 2007 the European Union finished the ratification process of the agreement - which was hailed as the most important achievement of the EU-Russia summit in Helsinki during the Finnish EU Presidency - but in Russia nothing has been done to turn the negotiation result into a binding contract.
     
Russia has also failed to act as was agreed. According to the agreement the overflight fees that are paid to the Russian national carrier Aeroflot would be removed by 2014, but Russia also promised that it would not charge for any new flight connections launched in 2007 or thereafter.
      “This promise has not held true”, says Finnair VP Alliances and International Relations Kari Koli.
      For example last year Finnair started a new route from Helsinki to Seoul, South Korea, but an overflight charge is applied to that connection just like to all the previous flights using the Siberian airspace.
     
Nothing indicates that Russia would plan to give up the charges. Instead, it looks as though charging for the overflight rights would continue into the foreseeable future.
      The British daily Financial Times reported last month that in Russia a dispute is brewing over who gets the levied fees. Currently a new state-run airline is being established in Russia with the city of Moscow as a minority shareholder, combining eleven more or loss-embattled local airlines.
     
According to the FT, the organisers of the company which so far carries the working title Rosavia, have coveted the overflight fees that Aeroflot currently receives from its foreign competitors.
      Naturally Aeroflot is fighting back, as in 2007 the fees fattened its bank account by up to USD 300 million (EUR 226 million). This equals Aeroflot’s end-year result in 2007.
      In 2008 as well as this year making a profit is even harder for Aeroflot and other airlines, so holding on to the overflight charges is that much more crucial.
     
The Finnish carrier's Asian strategy has made Finnair one of the largest airlines utilising the Siberian airspace.
      The relatively small Finnish national airline recompenses Aeroflot around EUR 20 million per year, in other words nearly a tenth of the entire annual dues.
      The sum is the same that Finnair, which is struggling with severe profitability pressures of its own, managed to save up from its labour costs on the conclusion of lengthy labour negotiations.

The EU Commission has continuously sought to bring up the overflight fees in discussions with Russia, but Russia continues to tie the matter together with its possible membership in the World Trade Organisation.
      The same argument has been used in talks over timber tariffs as well.
      Russia says it will remove the overflight fees as soon as it attains membership of the WTO.
      In the EU’s view Russia has no business becoming a member before the fees have been removed.
      In reality this arrangement is becoming more and more theoretical, for concrete interest towards the WTO membership is clearly fading in Russia.


Previously in HS International Edition:
  Russia continues to charge foreign airlines for use of its airspace (14.12.2007)
  EU-Russia Summit agrees on Siberia overflights, but not on bigger issues (24.11.2006)

Helsingin Sanomat