Aviation in Times of War
Closed airspace, confiscated aircraft, expensive kerosene: How state-based conflicts imperil civil aviation and its insurance coverage
Elisa S. and her partner Gian were swimming in the Dead Sea when rockets flew over their heads toward Israel. Any thought of continuing their holiday was out of the question — as was their planned return flight. After an adventurous journey from Jordan to the Red Sea and a boat trip to Egypt, they were finally able to return to Zurich days later. This is just one of thousands of similar stories in a world where wars and diplomatic tensions are increasingly disrupting air travel.
The number of active state-based conflicts has reached its highest level since the Second World War — so reads the "Global Peace Index 2025", a report by the Institute for Economics & Peace, published even before the outbreak of the Iran war. Inseparably linked to these global-scale conflicts are sanctions that have now become virtually impossible to track. Beyond the growing number of areas directly affected, this situation also has far-reaching consequences for the global aviation industry. Planning increasingly requires that not only operational efficiency but also geopolitical factors are taken into account — above all, airspace that is closed or must be circumnavigated for safety reasons.
Long Flight Times and Expensive Resources
Airlines are inevitably forced to make continuous adjustments to their operations. Alternative flight routes through still-accessible airspace not only extend travel times but also lead to higher staffing requirements and a greater risk of delays and cancellations. Since air freight is equally affected, this risk is further compounded by delivery delays and deferred maintenance. As the Iran war has strikingly demonstrated, conflicts can also lead to a scarcity and price increase of energy resources critical to the aviation industry. Hedging against this risk — for example through kerosene futures — is only possible to a limited extent.
Passenger Rights as a Risk Factor
Where there are delays and cancellations, frustrated passengers are never far behind. But frustration rarely stays just that — passengers frequently also make financial claims against airlines. While certain contractual claims may apply in this context, the EU Air Passenger Rights Regulation of 11 February 2004 usually is of greater significance. It grants passengers not only the right to meals during waiting times at the gate, free rebooking, or prompt refunds, but also to compensation payments of up to 600 euros per flight for each passenger. To avoid such payments, airlines must demonstrate extraordinary circumstances, such as bad weather conditions which prevented a flight, or – as has been increasingly common of late – a state-based conflict which poses a safety risk to the flight.
Switzerland has adopted the Regulation through an agreement with the EU effective 1 December 2006. However, among other things, it remains disputed whether flights from Switzerland to a third country and vice versa fall under the agreement. Regardless, the regulation carries considerable risks for Swiss carriers as well.
Rise in State Measures
Beyond day-to-day operational risks for airlines, perils are growing in other areas too. Accidents remain rare but cannot be discounted. Increasingly in focus, however, are the actions of state actors. In addition to largely economic restrictions imposed through sanctions, certain states sometimes resort to far more drastic measures. A vivid example is the confiscation of several hundred aircraft by Russian authorities in 2022, which amounted to the effective expropriation of their owners. In some estimates, the total value of the seized aircraft was put at over 10 billion US dollars. And aviation does not stand alone; maritime freight feels the impact of such actions too, as the tense situation in the Strait of Hormuz illustrates.
Insurance Market under Pressure
Insurance products do exist to address many of these risks. Hull insurance, for instance, covers physical damage to aircraft. Liability insurance, in turn, covers third-party claims against an airline — such as those from passengers in the event of delays or accidents. Additional products protect against personal injury and cargo damage.
Since war-related risks are typically not covered under standard policies, specific war risk insurance policies are taken out. Whether a given incident qualifies as a war-related risk, however, is not always clear and depends on the specific circumstances. In the case of the Russian confiscation mentioned above, the leasing companies of nearly 150 affected aircraft and several engines consequently sued both their general and war risk insurers. The London High Court ruled in favour of coverage under the war risk policies and ordered the respective insurers to pay a total of over one billion dollars.
Yet even insurance cannot fully absorb this conflict-driven risk environment. To keep the insurance system stable, insurers are forced to adjust premiums, restrict coverage, or even terminate contracts altogether.
State conflicts ultimately affect other lines of insurance as well — travel insurance, for example, in the case of Elisa S.