Ukraine Monitor

economic and social impacts

Views/information on resilience or disruption of supply chains due to the Russian invasion in Ukraine and various sanctions

03/05/2022

Aerospace / Aviation

The European aerospace sector continues to recover post-COVID-19 at a much slower pace than other regions, notably Asia. The war in Ukraine has sector-specific impacts which are being discussed by industry and workers alike.

Impact on supply of equipment or raw materials from RU/UA/BY

The biggest concern in relation to raw materials is for titanium.

Specific company examples

• Safran = 50% supply from RU, but using previously increased stocks.
• Airbus = “geopolitical risks are integrated into our titanium supply policies” so “we are therefore protected in the short/medium-term”.

Concerns also for nickel, neon gas, and aluminum, with large supplies of the latter previously coming from RU. Companies are currently looking for alternative sources, although there are real concerns in relation to high prices.

Impact of rising energy/commodity prices

Soaring metal prices (aluminium, nickel, palladium, iron ore) and higher energy prices lead to a cost escalation that might impact sales and inflation in Europe.

Social impacts of sanctions (e.g. companies’ liquidity, wage payments)

The aerospace sector has been specifically affected by EU sanctions via the banned sales of aircraft and parts to RU and a ban on RU aircraft from EU airspace. Currently, around half of the RU commercial fleet is leased from companies based in Ireland. There are now issues with how the lenders will receive their money or how the vessels will be returned, with the Russian State deciding to nationalise the fleet.

With regard to the space sector, launches from the Baikonur Cosmodrome (Kazakhstan) have been cancelled and Arianespace is suspending launches of Soyuz (Russian-made rocket). There are also concerns about the future operation of the International Space Station.

There are very few EU workers based in UKR/RU; however some Safran workers based in RU have asked to return to the EU.

Specific company examples

• Boeing: has closed their office in Kyiv and paused pilot training in RU. They have suspended parts, maintenance and technical support services for Russian airlines.
• Airbus: backlog of 40 planes (A220 and A320) to be delivered to lessors. Services provided by the Airbus Engineering Centre in Russia (ECAR) have been suspended.
• Safran: has stopped all joint ventures in RU.

An additional impact worth mentioning

There are concerns from trade unions that SMEs in the supply chain will be more impacted/will feel the costs more than large companies like Airbus/Boeing. Trade unions are concerned that this could lead to further unemployment.

Working Paper

Aeronautics industry: Is the post-Covid recovery compromised by the war in Ukraine - Syndex working paper (March 2022)