After Russia’s invasion of Ukraine in late February, sanctions imposed by Western countries are threatening to paralyze the country’s air transport. Aircraft leasing companies have until March 28 to terminate contracts with various operators, which affects fleet availability. The situation poses a major problem for Russian airlines starting with Aeroflot, Azur Air, Pobeda, Rossiya, S7 and UTAir, among others. If these airlines are starting to experience difficulties in flying to major destinations in Europe and America, the availability of aircraft may lead to a standstill of their fleets.
According to airline industry data, between 980 and 1,000 passenger aircraft in service, of which roughly 800 are on lease. Of these 800, two thirds are leased to foreign firms for a value of US$10 billion. AerCap is the most affected leasing company as it owns many passenger aircraft operating in Russia and Ukraine. The situation for leasing companies or lessors is not favorable with the real possibility of breaking their commercial agreements with Russian companies.
With the drastic reduction of capacity during 2020 and 2021 due to the pandemic, they are once again at risk of being left with a significant stock of aircraft parked in complete uncertainty. Without an operational fleet, Russia’s connectivity is at risk. This is affected by the suspended flights to the United States and Europe, as in the case of Aeroflot, S7 and other Russian airlines, which could risk losing the lucrative summer season.
Under the former Soviet Union, Russian commercial air transport was run by Aeroflot. With the end of the Cold War and the independence of the countries that make it up, the airlines that were established replaced their aircraft with Western material in the absence of alternatives from manufacturers such as Antonov, Ilyushin or Tupolev that support the operation and respond adequately to the needs of modern air transport. Beyond the forced termination of contracts, the lessors also face the threat of being left without payments for aircraft after the West takes Russia out of the SWIFT system. This could mean an early departure of aircraft and/or termination of contracts.
Another problem that arises is related to the recovery of the aircraft. In a belligerent climate, there is a possibility that after the end of the contracts, Russia will not allow the owners to remove the aircraft from its territory or at least will make it difficult for them to do so. Some similar cases have already been known in Iran, for example.
On Saturday March 5th, Russian airline Aeroflot announced suspension of its international flights as of Tuesday, March 8, in the midst of a wave of Western sanctions against Moscow for the invasion of Ukraine. The decision is due to new “circumstances hindering flight operations,” the company said in a statement, which will maintain domestic connections and with Belarus. Russia’s aviation regulator, Rosaviatsia, said it had “recommended” Russian airlines using leased aircraft registered outside Russia to cease flights abroad to avoid requisitioning the aircraft. The Russian company S7, the second largest in the country, announced on Friday that it was ceasing its flights abroad.
Russia is a party to the Cape Town Convention, which enforces aviation financing and makes it easier for lessors to repossess aircraft when operators, mainly airlines, are unable to pay. Despite the existence of this agreement, in practice the task of recovering aircraft is not easy, and it is often necessary to go to court for a long period of time in order to comply with what has been agreed.
Russia’s warnings of retaliation against the West cast doubt on whether the government of Vladimir Putin will facilitate the departure of aircraft from Russian companies. Russia is already affecting Western operators by prohibiting them from using its airspace to transit routes between Europe and Asia, so an escalation of sanctions could lead to further retaliation.
On Wednesday March 9th, the UK unveiled new aviation sanctions which would allow the possibility to detain any Russian aircraft and ban exports of aviation or space-related goods to Russia. One plane had already been seized. The measures imply it is an offense for any Russian plane to fly or land in the UK.
The ban includes any aircraft owned, operated or chartered by any person connected with Russia or designated persons or entities, and will include the power to seize any aircraft owned by persons connected with Russia, the British Foreign Office said in a statement.
“Banning Russian-flagged aircraft from entering the UK and criminalizing their flight will inflict further economic pain on Russia and those close to the Kremlin,” Foreign Secretary Liz Truss said in a statement.
The British Foreign Office said it will introduce new legislation on Wednesday to implement the measures, which also include the power to remove from the British aircraft register any aircraft belonging to sanctioned Russian individuals and entities.
British Transport Minister Grant Shapps said one plane has already been seized while further investigations were carried out. The Telegraph reported that the private plane was linked to a friend of Russian billionaire Roman Abramovich. “We know it is not a Russian company that has the plane, but it is a Luxembourg-registered aircraft. We are carrying out further checks before releasing it,” Shapps told LBC radio.
