What will happen to aircraft from the EU and the US in Russian airlines? Main Questions
On March 28, European companies finally lost the ability to infect, insure and repair aircraft developing in the future – these restrictions were introduced by the fourth EU coverage package. On the Russian side, laws were adopted, foreign entrepreneurs were recognized as a covert nationalization of foreign courts. For the global aviation industry, this means that the crisis – leasing and insurance companies can suffer multimillion-dollar losses.
Russian airlines used more than 1,300 aircraft. This number includes the production of cars in various forms of ownership – Russian aircraft, imported aircraft owned by companies, and, finally, imported aircraft that a Russian airline leases from foreign lessors. Recent cases of a large share.
Reuters provides data to the analytical company Cirium, according to available data, the Russian airline has leased 515 aircraft from foreign lessors.
Russian Minister of Transport Vitaly Savelyev said that foreign lessors are assembling 500 cars worth $20 billion – requests have been received for them.
Mainly leased or leased aircraft allowed companies from European countries. The largest such company by value in the Russian market is AerCap, headquartered in Dublin. It owns 152 aircraft with a total value of 2.1 billion euros.
Also among the market leaders is SMBC Aviation (owned by Japanese consortium of Japanese institutions, headquartered in Dublin) – it has 34 sums worth $1.3 billion.
Another big player is Avolon (headquartered in London), which is lending $14 worth 320 million euros. (data from the Financial Times).
The BBC Russian Service answers top questions about the aircraft public situation.
If planes are carried by foreigners, why are they still in Russia?
78 individuals managed to be held accountable abroad after being sent, Russian Minister of Transport Vitaly Savelyev reported.
This was accepted, including those arriving in countries that did not take action against Russia, for example, in Armenia and Turkey. Arrest, apparently, occurs even during “export” flights.
“They are [Аэрофлот] “flying for their passengers – there were two long-haul cars,” he said.
Immediately after the arrest, the Ministry of Transport restricted the flights of Russian carriers abroad. They can only fly Russian registered or imported registered owned and registered in Russia.
“We are looking for legal ways to negotiate with lessors and resolve this issue, but we are not leaving yet … but we are not giving away. Because giving away means leaving yourself without a flight,” said Vitaly Savelyev.
Carriers’ debts can also be provided to banks, which could provide guarantees for leasing transactions.
“This is about 200 billion rubles for all ongoing ones, because our banks … issued letters of credit against foreign banks, guaranteeing that these payments would be,” Savelyev said. According to them, the default occurs on their obligations, thus it can affect the banks.
The Russian authorities, in order to leave the planes in Russia, actually adopted a new legislative framework. In particular, they allowed the re-registration of aircraft already being tested in foreign registries. It is this practice that some Western businessmen actually consider to be confiscation.
According to the Ministry of Transport, almost 800 vehicles have already been transferred to the Russian Register of Foreign Affairs.
The International Civil Aviation Organization (ICAO) has reported that double registration may lead to the discovery of an offense – the Chicago Applicability Volume.
Two rulings that received the government, after signing the laws, allowed insurance, reinsurance and maintenance of ships on the territory of Russia, and also limited their early return – financial, maintenance in this way of foreign aircraft on lease and their certification were also transferred to Russia.
Now the participation of foreign companies is not required for maintenance – a certificate from the Russian regulator is enough.
The technical block of Rossiya Airlines in St. Petersburg received an extended certificate from the Federal Air Transport Agency for the maintenance of foreign-made aircraft that are registered in the state register of the Russian Federation.
The authorities are also going to insure the planes that remained in Russia with Russian reinsurance companies “under the Central Bank,” the Ministry of Transport specifies.
Okay, the planes are coming back – what will happen to the delivery of parts for them?
Since March 28, EU companies have no right to supply aircraft that will be located in Russia.
Minister of Transport Vitaly Savelyev called the temporary situation that has developed with aircraft developing at the end of March.
“At some stage, spare parts are growing, which we have been deprived of. I’ll tell you that we are looking for a solution. When nothing has started yet, we have calculated these options,” he said in the Federation Council.
One solution to the problem is to remove parts from some aircraft in order to repair others. Some aircraft that are being dismantled may also be on lease. In particular, Igor Poddubny, director of the aviation technical center of the Ural Airlines company, spoke about the likely future in early March.
According to its designation, safety carrier aircraft fly two to three months without having to change a part in them.
“We started to do an analysis and came to a flight that, without fail, neither today nor tomorrow we will not stop, that’s for sure. Nothing came true, two or three months,” Interfax quotes Poddubny.
At the end of March, this seemed to be the beginning of reality.
The Pobeda low-cost airline (part of the Aeroflot group) includes from 41 to 25 aircraft in the fleet so that the rest release spare parts, and the spare parts were seized before the lost supply chains were restored.
About it reported RIA Novosti with reference to a letter from the airline’s CEO Andrey Yurikov. Most of their aircraft are leased.
What will they fly in Russia now?
The ban on leasing aircraft in Europe applies to any aircraft – not just those that originate in Europe.
On March 1, Boeing suspended the supply of spare parts and maintenance in Moscow.
On March 18, the US Department of Commerce banned refueling, interior items and services (exceptions only with special permits) for 99 serviced Boeings used in Russia.
While the airworthiness of imported aircraft is limited inside Russia, it is no longer possible to fly them abroad due to the call.
According to the Ministry of Transportation of Production, for international flights, Russian aircraft – or imported ones, which were acquired in ownership and registered in the Russian register. In total, these are 193 aircraft, of which 148 are Sukhoi Superjet aircraft.
However, the SSJ is a regional aircraft with an expected range of about 3,000 to 4,500 km. In conditions of closed skies over Ukraine and southern Russia, routes have been greatly lengthened even in countries such as Turkey and Egypt, which did not close the skies for Russian companies. One option could be connecting flights.
Against the background of this “fleet” on March 25, the sale of air tickets for new regular flights from Sochi to Armenia, Egypt, Israel, Kazakhstan, Turkey and Uzbekistan was opened. The flights will be carried out by its subsidiary Rossiya on the presented Superjet – for this purpose, up to 10 such aircraft will be based at the Sochi airport.
The flight program from Sochi is focused on transit passenger traffic from other base airports of the group – Moscow, St. Petersburg and Krasnoyarsk, a company representative specified.
Who will pay for the planes left in Russia?
Most likely, insurers, reinsurers and Western lessors will eventually end up with the main damage by transferring. However, before this is decided, the company is waiting for long litigation.
“In particular, disputes arose over the expiration of the period of validity determined automatically after the decision was made or it was canceled by the carrier before the actual event of the claims – the expropriation of aircraft” – wrote in his Fitch Ratings article.
According to Fitch Ratings, the total worst-case claims could be up to US$10 billion, which would now be the highest annual reimbursement in the history of aviation insurance.
The new Russian laws, paradoxically, partly eased the position of foreign lessors, expressed it more unambiguously.
Stephen Udvar-Hazy, chairman of the investment firm Air Lease, said the new Russian cooperation is active, that Moscow has become the target of aircraft confiscations. This can help landlords in the interests of claims against insurers, writes the British general newspaper Financial Times.
Nevertheless, some companies still managed to return the aircraft to lessors. Earlier in March, UTair wrote in a letter that it had decommissioned Boeing 737NG enemy aircraft in accordance with the requirements of the owners-lessors, as well as contracts for its entire fleet, which was under operating lease.
In the future, the situation with Russia, according to Fitch, will spread to the entire aviation insurance market. In particular, insurers and reinsurers are responding to dependency on persistence and declining market confidence.
“If it can be a young man in Russia, maybe it’s a young man in China too?” The Financial Times quotes his source as saying.