It has been said many times that if you want to know the future then you only need look to the past. In the here and now we have already lost the Russian market, now I wonder how many are considering the fact that we might yet loose the China market too? In this uncertain environment, it would be short sighted not run scenarios and stress tests to find out if a business can cope with losing the Chinese market as well as Russia, however unlikely it might be and indeed might seem. Tensions are escalating in the US over media reports that China is increasing its support for Russia and its ongoing war in Ukraine, while the spectre of a Taiwan invasion also remains.
Are we witnessing the death of globalisation? Globalisation has sustained our market growth, and been made a reality with the supply of aircraft to airlines around the world.
Russia acceded to the Convention on International Interests in Mobile Equipment and the Protocol to the Convention on Matters Specific to Aircraft Equipment (better known as the Cape Town Convention in May 2011 but as not ratified the legislation. As Russian airlines deny the return of aircraft following requests by lessors acting in accordance with global sanctions, international law now means nothing. Russia has pulled away from the international rules based system. Other countries, as happened in the 1930s, might well see this as the chance to do the same, creating a firmly polarised world, that will lead to no-go areas for businesses.
This might all go away, but to make it go away you have to remove dictators through either peaceful action by civil unrest or by war, civil or otherwise. Am I scare mongering? I would argue that it is sensible to discuss such scenarios openly and ask those companies that you invest in to create/adjust a risk profile with the USA and its allies as a starting point of “safety” for assets, and then adjust for those countries which find themselves close to potential war zones based on their alliances. While the world is distracted by the actions in Ukraine, there is also a resurgence of Hindu fundamentalism in India that raises the prospect that India will cease to be a secular country and threatens relations with its neighbour Pakistan.
The only safe aircraft/asset at this time is an aircraft/asset based in and transiting to countries aligned with the USA. Unless perhaps you are in a country that can stride both sides of the divide (as it exists today). There is no question that the real winner in 2022 is the UAE, flights to a UAE hub are now more attractive than ever for Europeans transiting to APAC and Dubai is gaining from a huge influx of Russian citizens at this time.
The world is unstable and it has changed beyond recognition since COVID-19 struck. COVID-19 was it seems this generation’s Wall Street Crash.