Foreign lessors may lose hundreds of aircraft to Russia in what amounts to theft. Over 50% have already been illegally added to Russian registry.
Russia fails to return 400 aircraft to leasing firms
To comply with international sanctions Russia was required to return these aircraft to their owners. As yet, none have been given back. With an estimated value of around $10 billion this will be the largest loss of aircraft in aviation history.
The majority of these planes are registered with aviation authorities in Bermuda and Ireland. Both these authorities have suspended the airworthiness certificates of all these aircraft. Despite this global flight tracking data indicates that they are continuing to fly domestic routes in Russia.
Instant cause for grounding
Under normal circumstance this suspension would mean that all these aircraft would be grounded. Russian Prime Minister Mikhail Mishustin has nullified this by recently announcing that the aircraft have been transferred to the Russian registry. To do this he has introduced a new law allowing Russian airlines to register foreign owned aircraft.
According to the Russian government over 50% of these aircraft have already been added to Russia’s registry. This has created a situation where these planes are registered by two different aviation authorities. Although no aircraft is permitted to have dual registration under international law.
If these planes were ever to leave Russia, they would be grounded on reaching any international airport. Thus far 78 Russian aircraft have been impounded in various parts of the world. In response Russia has suspended all flights of foreign owned aircraft out the country. This makes it impossible for these planes to be repossessed and causes major budgeting issues.
Adding to Russia’s difficulties is the decision by Bermuda’s aviation authority suspended the certification of over 700 aircraft. As a result of the international sanctions Bermudan aviation officials have been unable to provide safety inspections. All these planes should be grounded as none of them have airworthiness certificates. Yet they too are continuing to fly in Russian airspace.
Foreign aircraft owners should be able to recoup their losses with payouts from their insurance. This may be the largest ever collection of insurance claims in aviation and is sure to take years to negotiate, due to the complexities of the situation. For most leasing firms these aircraft account for less than 10% of their total portfolio.
For some lessors their losses will be mitigated by claiming back the security deposits that Airlines pay at the beginning of their lease period. Although these amounts will only be a tiny fraction of the full value of the aircraft. Most deposits represent three months’ rent which amounts to 2-4% of the full aircraft value and is as much as players can win when playing for a huge slots Chile pot.
Refusing to obey rules
Not all Russian owned airlines are complying with the orders coming from Moscow to refuse to return foreign owned planes. UTair Airlines recently made a statement where they confirmed that they would withdraw from service all the foreign owned Boeing 737 NGs that they operate. These planes have not been flying since then but are yet to be returned to their rightful owners.
As Russia’s war with Ukraine grinds on the aviation industry continues to feel the repercussions. Although this latest reverberation will be a blow to leasing firms it is unlikely to make a long-term impact.
