Most of the planes still fly on Russian domestic routes despite the fact that they should be suspended from flights.
Russia is not going to return their aircraft to lessors / REUTERS photo
Monday, March 28, is the deadline for Russian airlines to return more than 400 leased planes worth nearly $10 billion.
According to consultancy IBA, most of the planes still fly on Russian domestic routes, although Bermuda and Ireland, where most of these planes are registered, have had their airworthiness certificates suspended, which usually means they should be banned from flying.
“I’m afraid that we will witness the largest theft of aircraft in the history of commercial civil aviation,” said Vladimir Bilotkach, assistant professor of air transport management at the Singapore Institute of Technology.
Under international rules, dual registration is prohibited, but Russia has already transferred more than half of the aircraft owned by foreign countries to its own registry after passing a law that allows it. The Russian government also stated that 78 aircraft of Russian carriers will not return to Russia because they were arrested abroad.
While the planes are insured, the unprecedented nature and magnitude of potential losses are likely to mean years of litigation between lessors and insurers before any payout decisions are made, analysts say.
And even if the planes are seized, the cost of the refund will be in question because the planes must have accurate maintenance records to make sure they were fitted with original traceable parts—another area targeted by Western sanctions against Russia.
While the total cost of aircraft is huge, the impact on individual leasing firms can still be manageable, even if write-offs are needed, as aircraft leased by Russian airlines make up less than 10% of most leasing companies’ portfolios.
According to Reuters, some private Russian airlines have indicated they are ready to return the planes to lessors, although it is not clear whether the Russian government will approve of these actions.
In some cases, lessors have security deposits that can be confiscated and should help cover some of any damages, but still only a fraction of the value of the aircraft. For example, a deposit for a $20 million narrow-body aircraft could be around $450,000, the equivalent of a three-month lease, says Brad Daly.
Ratings agency KBRA said security deposits typically range from one to four months of lease, depending on the credit score of the airline that leases the aircraft. Although, for example, one of the Chinese leasing companies reported that they did not take insurance deposits from the state-owned Aeroflot, which had the best credit score before the sanctions.
As UNIAN reported earlier, the European Union Aviation Safety Agency (EASA) has suspended aircraft airworthiness certificates for all Russian airlines due to sanctions against Russia. It is noted that without a certificate of airworthiness, the aircraft cannot fly. The document is issued by the civil aviation authority of the country where the aircraft is registered.
Earlier, Russian President Vladimir Putin signed a document that actually allows Russian airlines to use the aircraft of foreign lessors, despite their ban.
In addition, the State Duma of the Russian Federation approved the United Russia initiative on the possible sale of foreign companies and even nationalization if the business leaves the Russian market or “there is a risk of unreasonable liquidation” due to sanctions.