Although the war in Ukraine has not affected the flights of Brazilian companies so far, planemaker Embraer and airlines Latam, Gol and Azul are closely monitoring its developments, which may have a significant impact on costs and operations in the sector.
In the case of Embraer, the international community’s sanctions against Russia may disrupt access to titanium, a light metal used to make aircraft and their engines.
VSMPO-Avisma, controlled by the state-owned Rostec, has a monopoly on the production of titanium and parts forged with the metal in Russia. And it is an important supplier to the aircraft industry. Boeing and Airbus also depend in good part on Russian titanium.
An embargo on Russia, therefore, could directly impact the largest planemakers in the world.
According to Reuters, VSMPO-Avisma accounts for 25% of global titanium supply. Specifically in the aircraft market, this share rises to 50%, according to international consultants.
Sought for comment, Embraer said it evaluates the titanium supply chain on an ongoing basis, as it does with other materials. “At this moment, the supply of titanium does not concern Embraer, since the company holds a high level of stock of this material,” the company said in a note.
In a LinkedIn post last week, Latam Brasil CEO Jerome Cadier listed potential impacts of the war for airlines and stressed that the pressure on costs is “undeniable,” also citing titanium. “Unfortunately, in the situation the industry is in, these increases will impact ticket prices. It is a shame, especially at a time when what we most want is to fly again,” he wrote.
In the executive’s view, the war in Ukraine can affect the capital market and the availability of credit and the price and supply of commodities relevant to the industry, including metal.
Sought to comment on the consequences of the war, Latam said it does not fly to Ukraine and, so far, its flights have not been affected by the closure of airspace in different countries.
Gol also reported that it does not operate flights to Ukraine and reinforced recent positioning of the Brazilian Association of Airline Companies (Abear), which already warned about potential impacts of the exchange rate and oil on the costs of the airline industry.
“About this sad moment, we inform that our members do not operate flights that have as final destination the conflict region and we follow closely the impacts on the foreign exchange rate and oil prices, which can further increase costs,” the association reported.
Azul said in a note that “its operations continue as normal and without any impact.” “A possible effect on the value of tickets will depend on the impact of the war on costs such as foreign exchange rate or oil, which are constantly monitored by the company,” it added.
Source: Valor International