Russia-Georgia Ban on Direct Flights will Harm Both Countries

June 27, 2019

Veritas Global issued an assessment quantifying the impacts of the proposed ban on direct flights between Russia and Georgia, scheduled to take effect on 8 July 2019. The ban will impose economic harm on both countries. Russian airlines, which offer 76 percent of the capacity, will be worst impacted and stand to lose $225 million in revenue per year. Georgian airlines will face revenue losses of $61.3 million. “The proposed ban will have negative consequences for both countries, but Russian airlines stand to be impacted the worst,” said George Anjaparidze, Veritas Global CEO.

Visitors from Russia, which make up about 82 percent of direct travelers, will experience a loss in consumer welfare of $63 million per year compared to $13.6 million in losses for travelers from Georgia. These losses are explained by a combination of longer travel time for diverted passengers and having to settle for less suitable substitutes for discouraged travelers. “We expect 63 percent of the Russia-Georgia direct air travel market to be diverted to other regional hubs such as Minsk, Riga, Almaty and Istanbul. That is a significant inconvenience to those passengers that prefer to fly direct,” said Anjaparidze.

Tourism spending will also be impacted. Georgia can expect lower tourism spending of $111.5 million per year due to a reduction in passengers from Russia. Spending in Russia by Georgian tourists will also decline, resulting in a reduction of $28.9 million.