The fate of hundreds of planes leased by Russian airlines from foreign companies has become murkier after Russian President Vladimir Putin signed a law allowing airlines to register these planes and continue to fly them.
Russian state media said the law will allow Russian airlines to retain their fleets and operate foreign planes on routes in Russia.
Many planes used by Russian airlines are leased to foreign companies, including several in Ireland, a member of the European Union. Last month, the EU banned the sale or lease of planes to Russia as part of sanctions aimed at punishing Russia for invading Ukraine. He gave leasing companies until March 28 to terminate ongoing contracts in Russia.
Last week, the Russian Air Transport Agency advised airlines with foreign-registered planes not to fly them out of the country because of the risk of them being repossessed.
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Separately, the sanctions prevent Western companies from supplying spare parts and maintenance to Russian airlines, and analysts say it is unclear whether the planes are now insured.
Various estimates place the number of foreign-owned planes operated by Russian airlines at around 500 or more, and the vast majority of them were in Russia when the war began on February 24. Aviation consultancy firm Ishka estimates the foreign-owned planes are worth $12 billion (NZ$17.8 billion), nearly half of which from Ireland-based lessors.
“We are in uncharted territory. We don’t know if they’ll see those planes again,” said Helane Becker, aviation analyst for financial services firm Cowen. “Our assumption is that (the Russian carriers) use all the parts they have, then start cannibalizing (parts) to keep the planes flying, and when it’s all over, it’s all settled.”
According to aviation consultant IBA, the company most exposed to war is Dublin-based AerCap, with 152 planes worth almost $2.4 billion flying, parked or stored in Russia or Ukraine. .
An AerCap spokeswoman said 5% of its fleet by value is in the hands of Russian carriers. She referred to a Feb. 28 filing in which the company said it would comply with the phased reduction in aircraft leasing to Russian airlines and declined to comment further.
A spokesman for another Irish lessor, SMBC Aviation Capital, said the company owned 35 planes in Russia – IBA valued them at around $1.4 billion – and had issued termination notices for all leases with Russian airlines. The spokesperson said the company “is in contact with all relevant authorities”, but declined to comment further.
Other companies declined to comment or did not immediately respond.
There are more than 100 aircraft leasing companies, many of which are too small to survive if they lose more than one or two planes, according to Vance Hilderman, CEO of AFuzion, a Los Angeles-based airline consultancy. .
“Before, Russia would let you in. You would bring in a few pilots and repossess the plane at night, sort of undercover,” Hilderman said. “But it will spur a whole new cat-and-mouse business. The stolen plane will not leave Russian airspace.
Hilderman said that for the few remaining flights leaving the country — to Turkey and destinations in the Middle East and Asia — Russian airlines will only use planes they own or lease from Russian lessors.
Becker, the Cowen analyst, said the law Putin signed violates a decades-old treaty called the Chicago Convention that allows lessors to cross international borders and take back planes from failing customers.
Last week, Fitch Ratings warned that debt backed by aircraft leases currently in Russia were at risk of being downgraded due to the difficulty of the risk that state-owned airlines would stop making payments “or” confiscate “( i.e. fly) airplanes”. Fitch said several donors moved a few planes out of Russia and Ukraine before the sanctions were announced.
The sanctions also affect the world’s two main aircraft manufacturers, the American Boeing and the European Airbus. According to JPMorgan, Boeing has 35 of its 737 Max and 777 freighter planes on order from Russian airlines, including 30 that were due for delivery this year, and Airbus has orders for 27 planes from Russian airlines, seven of which are expected to be delivered. This year. year.