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Podcast

The risks of gray zone aggression to the aviation industry

Geopolcast: Season 2 - Episode 1

January 14, 2025

Credit and Political Risk|Crisis Management
Geopolitical Risk

In this episode of Geopolcast, join host Elisabeth Braw and speakers Jared Seth and Sam Wilkin as they discuss the risks of gray zone aggression on the aviation industry.

This episode also explores the impact of gray zone aggression on businesses globally with insights from our latest Political Risk Index.

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      The risks of gray zone aggression to the aviation industry

      Transcript:

      JARED SETH: The industry is looking to collaborate, so making sure that information is shared, making sure that best practices are adhered to and protocols exist. Perhaps one of the problems and the newest challenges is just the number of incidents that are occurring and the potential for that to be quite overwhelming in some circumstances.

      ELISABETH BRAW: A warm welcome to Geopolcast, the podcast from WTW exploring geopolitics and its impact. My name is Elisabeth Braw. I'm a senior fellow at the Atlantic Council, where I focus on the intersection between geopolitics and the globalized economy, and also on hybrid and gray zone aggression. And I'm the author of Goodbye Globalization and the upcoming, The Undersea War.


      In each episode, I'm joined by experts who can help us better understand geopolitically related issues of the day. In recent episodes, we have discussed attacks on global shipping, risks facing the oil and gas sector, and threats to sea bases-infrastructure, among many other subjects.

      Today, I'm delighted to be joined by Jared Seth, who is a managing director at WTW, looking after global aviation and space. And I'm also joined by Sam Wilkin, WTW director of political risk analytics. Yes, we'll discuss risks to aviation, specifically geopolitically linked threats to aviation.

      I'm sorry to say they do exist, and not only do they exist, they are growing fast, which is clearly a concern not just to airlines, but to us ordinary travelers as well. And specifically, the threats are mostly of the gray zone kind, they are in the gray zone between war and peace, and include everything from navigational jamming to politically motivated government seizures of aircraft. Jared and Sam, welcome.

      SAM WILKIN: Thank you. Great to be here.

      JARED SETH: Thank you.

      ELISABETH BRAW: Now, Jared you write about these threats and risks in WTW's upcoming report on gray zone threats, it really is quite concerning. Describe what you're seeing.

      JARED SETH: Thanks, Elisabeth. So aviation has always been a vector for politically linked actions. If we think back to hijackings in the '60s and '70s to the use of aircraft in 9/11. Where there's a Civil War or uprisings in a country, then we'll often see control of the airports as a key strategic objective. Last year in '23, we saw a number of aircraft destroyed at Khartoum airport in Sudan.

      But I think in recent years, we definitely see this emergence of more gray zone threats in aviation. And you mentioned in your introduction the politically motivated seizures of aircraft, and I think this is the best place to start, really, and a good example of how the aviation industry has faced new and unexpected threats. So if we go back to February '22, following the Russian invasion of Ukraine, and we saw the imposition of sanctions by the UK, the US, and the EU against Russia.

      And some of these focused specifically on Russia's aviation industry by implementing prohibitions effectively on the export of aircraft to Russia and the provision of insurance in respect of aircraft for use in Russia. And what this meant was that the leasing of about 600 aircraft by US and European lessors to Russian airlines had to be terminated.

      Now, in response to these sanctions, Putin issued a decree which effectively prohibited the return of the aircraft to the foreign owners, and this was to ensure the uninterrupted functioning of activities in the field of civil aviation. Now this was in contravention to the Chicago Convention on international interests in mobile equipment, to which Russia had been a signatory since 2001. And I think if we talk about a collapse of the rule-based order, then that's a good example.

      Now, 2 and 1/2 years on, we find that these Western aircraft lessors have been frustrated in their attempts to repossess all of their aircraft, and the Russian airlines continue to operate them in breach of the termination of the lease agreements.

      ELISABETH BRAW: So I have to interrupt you, Jared, but it's so fascinating. So leasing aircraft is clearly a key component of the global aviation industry, not every airline owns all its aircraft. And that was the case with these aircraft that were owned by Western companies, leased by companies, airlines in Russia and all of a sudden they were taken.

      And if I'm not mistaken, they never returned. They were never returned to their owners, correct?

      JARED SETH: Absolutely. I mean, at the minute we see legal cases going on between the lessors and their insurers to recover for the loss of these aircraft. And that's what's being called the mega trial currently running in the UK high court and that's because the amounts involved are staggering.

      The initial estimated $12 billion figure that has reduced through time, that's as a result of some arrangements that have been made where the Russian airlines have been able to legitimately purchase these aircraft in compliance with sanctions, and that's been quite a complicated and convoluted process. But the delta between those settlements and the remaining claims would still represent the largest loss to the aviation insurance industry.

      And this is from a position where Russia was an expanding aviation market and lessors were extremely keen to lease equipment to Russia, and then almost overnight that situation changed.

      ELISABETH BRAW: It really did. And Sam, this is part of clearly of a growing trend that is engulfing the aviation industry is not focused on the aviation industry, but the aviation industry is becoming affected by it. And that is clearly very destabilizing to an industry that is by nature international.

      And we have seen in just the past few weeks or so another installment or a new installments in these threats to the aviation industry, namely parcel bombs that have been placed in locations where they would have been put on cargo airplanes traveling, for example, from Leipzig in Germany to other cities. And there was a recent aviation incident involving a DHL plane that had traveled from Leipzig in Germany to Vilnius, where it crashed.

      We don't know yet what the cause was, German authorities had warned. And indeed UK authorities had warned of parcel bombs being placed on cargo planes. So since you look at the breadth and width of these threats, how have they evolved in the years that you started looking much more closely at them?

      SAM WILKIN: Well, so the next edition of the index, political risk index, tries to map the patterns of gray zone attacks around the world and where these attacks are happening. And generally speaking, Latin America is the gray zone. The gray zone attacks are largely in Eastern hemisphere phenomenon.

      So certainly the history of US gray zone action in Latin America during the Cold War could fill a multivolume set in very small type, but these days, Latin America is a relative haven of peace. On the other hand, in the Eastern hemisphere, there is a lot going on. There are basically two types of flashpoints.

      One flashpoint is around conflicts, like in Ukraine, and Russia's really comes out as probably the most intense gray zone actor of any of the emerging market countries. The report only looks at gray zone actions by emerging market countries. The other type of gray zone flashpoint that really comes out is fragile states.

      The fragility of states has been really key to enabling Russia's gray zone action, for instance, in the Sahel region of Africa at very low cost and exploiting a lot of ideology and anti-French sentiment as well. And similarly, the fragility of states has been really key to Iran's very low cost gray zone actions in the Middle East, where the fragility of Lebanon and Syria and Iraq has provided an ideal platform for a lot of gray zone action by Iran.

      So those two fields, they're conflicts and points of geopolitical competition and then fragile states have really been the flashpoints where the gray zone has taken off. And so far most of that's happened in the Eastern hemisphere. So I'm expecting that most of the aviation risks that Jared is talking about are going to be concentrated in the Eastern hemisphere, but I stand ready to be corrected.

      ELISABETH BRAW: And Jared, if I can ask you about these latest warnings that we have seen about parcel bombs, I mean, that is really quite extraordinary. You mentioned earlier hijackings in the 1970s, we thought that blatant harm being used against airlines, we thought that was a thing of the past, at the very least since the 9/11 incidents and then the global war on terror.

      We thought that aviation was safer and now we are seeing these threats or these alerts regarding threats to the airline industry being made very publicly by officials in the UK, Germany, and elsewhere. What does this mean for the airline industry? And it does cause a considerable fear, I think, among the general public, about what else can be done.

      Well, what other threats and harm can be directed against the aviation industry?

      JARED SETH: I mean, I think the nature of these attempted attacks has been surprising. I think, as you say, we probably felt that these direct attacks against aircraft was a thing of the past, whether that's because security surrounding aircraft is obviously increased dramatically in the aftermath of 9/11. And the ability of terrorists to take action against cargo or passenger aircraft, I think has diminished because of the wider spread security arrangements in the world.

      I think seeing the reports about this attempt, the use of magnesium in the devices which I read that it took two hours to put out one of those because the materials used are so flammable, this would have had catastrophic consequences to aircraft. So it is very alarming, it does feel like a new development and a return to more worrying times when it comes to commercial aviation.

      ELISABETH BRAW: And on that note, what else can aviation bosses and pilots and other crew members do to keep operations as safe as possible? Obviously there are security measures at airports and pilots know how to navigate manually in case of GPS jamming and spoofing. But what other measures can we expect to be introduced?

      JARED SETH: So I think it's difficult to comment specifically on aviation safety because I'm not an expert in that area, but I think what has certainly been seen as this greater sharing of information and the fact that the aviation ecosystem will share information, whether that's through international bodies like ICAO.

      So if we take the example of GPS spoofing or GPS jamming, there's been a tremendous increase in volume over the last couple of years, particularly around areas of heightened conflict, so whether that's in the Middle East or around Ukraine. And the reaction to that is really one where the industry is looking to collaborate. So making sure that information is shared, making sure that best practices are adhered to.

      And look, there were well-established procedures in place for pilots to mitigate the effect of GPS jamming and spoofing. You can rely on alternative location systems. So I think these protocols exist. Perhaps one of the problems and the newest challenges is just the number of incidents that are occurring and the potential for that to be, quite overwhelming in some circumstances.

      So, I mean, I have faith that knowing our clients and the way that our clients are extremely focused on safety, we get involved from an insurance perspective where we have insurers asking us about whether it's safe to operate flights to that country. The airlines have conducted their risk assessments before that. They have access to an incredible amount of information. So I have complete faith in the airline's ability to navigate these challenges. But certainly, there are more challenges out there.

      ELISABETH BRAW: And Sam, I think what we are seeing is a beginning division of the global aviation industry where Western airlines not only have to worry about gray zone threats, but also face limitations on where they can fly. And most dramatically, Western airlines are not allowed to fly through Russian airspace anymore. Russia revoked that right around the beginning of the Ukraine war.

      So the Western airlines have to fly around, which severely impacts flights between Europe and Asia, whereas airlines from other parts of the world can fly anywhere they like to the West and elsewhere in the world, and are not subject to that Russian ban on overflights. So what does this mean for the global aviation industry do you think?

      The fact that geopolitics is creeping in at every corner, both in a very small way through suspected parcel bombs and in a larger way through mass seizures of aircraft and indeed overflight bans.

      SAM WILKIN: I think you can make an analogy to what's happened in the Marine sector, which of course, is your area of expertise Elisabeth, and it's come down to insurance. Often things come down to insurance, it really always comes down to insurance. But in the Marine sector you've seen insurers unwilling to cover transiting the Red Sea and therefore alternate routes and much delays in shipping, which have then been passed on to the clients of shipping.

      I guess you could see something similar. It's not unreasonable to speculate that the sector could be divided in this way. We've seen this happen due to Western sanctions. We've seen that's happened in the energy sector. We've seen that due to technology competition happening in the technology sector.

      I can see that this would be a risk in aviation. The risk that worries me more is the one that you and Jared had already alluded to about safety. People tend to be very cautious, flyers, and some incidents here could really impact people's willingness to fly. But that's a risk that we in the insurance business call loss of attraction.

      I don't know if the insurance sector has really stepped into thinking about this in terms of the impact on airlines or the impact on tourism if something happens. But that's for me is a bigger concern because--

      ELISABETH BRAW: And you have to explain what this attraction is Sam.

      SAM WILKIN: So the idea of loss of attraction and I have to say I'm not political violence broker, so I'm not a specialist in this area, but the idea behind loss of attraction is you can cover to some degree, for instance, if your hotel is in the vicinity of a terrorist attack or if there is a terrorist attack, you can cover the loss of attraction of your asset that people don't want to visit the hotel anymore in insurance markets.

      I think that's a real risk for the aviation sector, is that people will be more reluctant to fly, less of an issue, perhaps for cargo or maybe that more is based on whether things are insurable. But really for passenger flights, I mean, that's got to be a significant concern.

      ELISABETH BRAW: It certainly is. Jared, can I just ask have your flying habits changed since you are in the business of watching the aviation industry on a daily basis?

      JARED SETH: Absolutely not. I mean, I think being in this industry, you realize, I mean, if we take, I guess, acts of war or terrorism out of, the aviation industry is incredibly safe. We've seen significant improvements in safety year on year. I've been working in the industry for 25 years and every year is safer than the one before.

      I think when we're looking at these incidents, although some of them do sound alarming, experiencing the strong safety culture that is embedded in our industry and with our clients gives me reassurance. We come to this from the insurance perspective and we're seeing part of the story. But actually the rigor with which airlines treat passengers safety, making sure that they're operating the aircraft safely is remarkable, really.

      We looked at conversations we have with insurers recently with the situation in the Middle East, the airlines continue to operate flights into certain areas of the Middle East. And people may look at that from the outside and think, well, how can you continue to operate these aircraft? Surely, that's not safe. But the airlines undertake incredibly rigorous risk assessments, and they're not going to do anything that's going to knowingly endanger passenger safety.

      So I have full confidence in the resilience of the industry to react to these threats, as we've seen with the steps they take to cope with GPS spoofing and jamming that just shows that these emerging threats come out. The industry through collaboration, is able to deal with them and come up with effective solutions.

      ELISABETH BRAW: And it is another example of how in aviation and some other sectors when a risk appears or a complication, and especially some risk relating to the journey of that aircraft or that vessel, new regulations come up that try to limit that risk as much as possible. So in the history of aviation and indeed also of shipping, we've seen new rules come up after every single accident that has taken place.

      I think it's safe to say most, if not almost all airlines follow very closely. Sam, I should ask you the question as well, have your air travel habits changed?

      SAM WILKIN: No, I have some quite elaborate holiday travel plans involving the Middle East and North Africa. So you can tell I'm an optimist. Part of the reason for this optimism is that we have seen retaliation by Western countries against gray zone attacks, for instance, by the US and coalition partners against the Houthis in Yemen.

      And Israel has retaliated quite dramatically against Lebanese, Hezbollah, and Iran because an attack on civilian aircraft is the thing that's likely to trigger that retaliation. I hope it's the thing gray zone sponsors will stay away from.

      ELISABETH BRAW: And just looking at maps like Flightradar24, I think there are a lot of optimists and probably a lot of safety experts because there are indeed a lot of flights, including in the airspace of some otherwise somewhat turbulent countries. But the flights keep appearing and very rarely any accidents reported. That is the good news.

      The bad news, which we addressed at the top of the show are the increasing gray zone threats. And I think what we'll continue to monitor is what other safety regulations in industry comes up with as these gray zone threats intensify. So with that thank you, Sam, thank you, Jared, for joining the podcast.

      SAM WILKIN: Thank you.

      JARED SETH: Thank you.

      ELISABETH BRAW: And to get the episodes as soon as they are released, make sure to subscribe. You can find us via your usual podcast players. And please recommend us to your friends and colleagues. See you soon.

      SPEAKER: Thank you for joining us for this WTW podcast featuring the latest perspectives on the intersection of people, capital, and risk. For more information, visit the insight section of wtwco.com. Willis Towers Watson offers insurance related services through its appropriately licensed and authorized companies in each country in which Willis Towers Watson operates.

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      Podcast host


      Elisabeth Braw
      Senior fellow at the Atlantic Council

      Elisabeth is a Geopolitics expert who has been consulting with the WTW Research Network since 2019, specifically exploring grayzone aggression and looking at its implications for risk managers. This work forms part of a wider research programme on geopolitical risk, including the importance of China and security impacts of climate change.

      Elisabeth is also the author of Goodbye Globalization, which was published by Yale University Press in February, 2024.


      Podcast guests


      Managing Director
      Global Aviation and Space

      Jared Seth is a Managing Director in WTW's Aviation and Space team.


      Director of Political Risk Analytics, Financial Solutions

      Sam Wilkin is WTW's director of political risk analytics, meaning he constantly monitors emerging and existing politically-linked threats to companies. He also leads WTW's annual political risk survey.


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