Policy Pulse - 27 June 2019 - George Anjaparidze
On 21 June 2019 the Russian President issued an executive order prohibiting Russian airlines to carry passengers from Russia to Georgia starting 8 July 2019. This was followed by a statement from the Russian Ministry of Transport indicating that Georgian airlines will not be allowed to land in Russia. If implemented, these measures mean there would no longer be direct commercial flights between Russia and Georgia.
Russian airlines will be worst impacted and stand to lose $225 million in revenue per year. Georgian airlines will face revenue losses of $61.3 million, given their relatively smaller market share in serving the Russia-Georgia travel market (See our analysis on Why harm Russian airlines and consumers?).
Visitors from Russia, which make up about 82% of direct travelers, will experience a loss in consumer welfare of $63 million compared to $13.6 million 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.
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.
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