On Sunday the European Union announced sweeping sanctions against Russia, which also impact the aviation industry. I’ve already written about how the European Union will be closing its airspace to Russia. Equally significant, arguably, is that a bunch of Russian jets are now supposed to be seized.
In this post:
Planes in Russia leased from EU companies to be returned
Aircraft leasing companies based in the European Union are being forced to terminate all contracts with Russian airlines in the next 30 days. For context, a significant portion of airline fleets aren’t actually owned by airlines, but rather planes are leased on a long term basis from aircraft leasing companies.
There are believed to be just under 1,000 commercial passenger planes in Russia, and nearly 800 of those are leased. There are all kinds of leasing firms, and they’re not all based in the European Union. However, some of the biggest ones are.
For example, AerCap is the world’s largest aircraft leasing firm, and it’s based in Ireland (given the tax advantages of being based there). The company has around 150 planes currently being leased by Russian airlines.
Even beyond the direct concept of leases being terminated, an equally big issue could be Russian carriers’ ability to make lease payments for planes they still have. With restrictions being put on banking in Russia, airlines there may no longer be able to make their huge leasing payments, which are hundreds of millions of dollars per month. That’s not even factoring in the collapse of Russia’s currency.
Actually seizing these planes is a different story
Leasing companies are now starting the process of trying to seize aircraft being operated by Russian airlines, though this probably won’t be as straightforward as it sounds:
- I can’t imagine aircraft leasing companies will have much luck sending people to Russia to repossess these planes
- Often it would be easier to repossess these planes at a foreign destination, but with Russian airlines being banned from many countries, there are limited opportunities for that
- The countries that Aeroflot continues to be able to fly to are generally going to be more pro-Russia, and I’m not sure it would be all that easy there either
While unconfirmed, there are rumors that a couple of Russian planes have already been seized. Not necessarily directly due to this latest sanctions, but rather in part because insurance has been canceled for jets. For example:
- A Nordwind Airlines Boeing 777-300ER with the registration code VP-BJP flew from Khabarovsk to Mexico City on February 26, and didn’t depart as planned
- A Pobeda Boeing 737-800 with the registration code VQ-BTC flew from Mineralnye Vody to Istanbul on February 27, and didn’t depart as planned
It’ll be interesting to watch these planes over the coming days, as well as the movement of other Russian aircraft.
Bottom line
European Union aircraft leasing companies have been forced to stop doing business with Russian airlines, which should lead to many planes being seized. At least that’s what’s supposed to happen, though the process of actually seizing these planes might be a different story, given that Russian carriers are prevented from operating to many points around the globe right now.
Russia has been investing a lot in its own aircraft development program for the past several years, so one has to wonder if that will become more of a focus, so that the country doesn’t have to rely on foreign aircraft. Then again, there’s the question of whether Russia will have money to invest in such a program…
Do you think leasing companies will be able to seize these planes?
The planes that really need to be impacted are the oligarch’s private jets. As always, it’s not the average Russian we have a beef with, but the so-called “elites”, referring only to their stolen wealth and stolen power. And what’s with the US not banning anything? How many oligarch planes are sitting in the Miami area now?
As soon as I heard about sanctions, I thought that aircraft leasing companies may be hosed. Sanctions will hurt the West but Putin is so bad that something has to be done, even to help the corrupt country of Ukraine.
The way things are going, I don’t think that many Russians will have the cash to travel or won’t even have a place to travel to. The only wild card is China for the moment but I think they will sit this one out for now.
Maybe EU member states will allow leasing companies some sort of write-offs. Though on a different scale, but what happened to planes on lease when Iran was slapped with similar sanctions?
If 800 airplanes are dumped on the market, this will cause a write down for every airline in the world.
"Slightly" OT, but take a look at Nordwind's B777-300ER seatmap: https://s01.cdn-pegast.net/get/7f/f6/1d/efac26d7dd4a1c878e69d070ac4f778bbda192a104e7267c20890350ef/B777-300%28VP-BJP%29.png. Interesting business class layout with just 1-1-1 across two rows. I tried finding a picture of the cabin, but to no avail. Does anyone know how it looks? (I'm guessing 2-2-2 but with blocked seats?)
Looks like it's the CX F seat - a true 1-1-1 configuration!
https://youtu.be/NpIWkU9qk3A?t=27
Surprising, but makes sense when you look up at the history of VP-BJP, which is an ex-CX plane (B-KPB)
Wow!
Some Russian airlines have (/had) a pretty solid hard product - Aeroflot's new A350s (might rival QR as the best business class around these days?), Transaero's "Imperial Class" and now this from Nordwind :)
The situation is actually more complex, because the prohibition also voids aviation insurance and reinsurance placed by or with Russian entities. That means that airlines and aircraft all over the world could potentially be affected by this if their insurers have any exposure to Russian reinsurance syndicates. It will take most people the better part of the month to simply figure out where their exposure lies, before they can even plan or execute ways to...
The situation is actually more complex, because the prohibition also voids aviation insurance and reinsurance placed by or with Russian entities. That means that airlines and aircraft all over the world could potentially be affected by this if their insurers have any exposure to Russian reinsurance syndicates. It will take most people the better part of the month to simply figure out where their exposure lies, before they can even plan or execute ways to unwind it. A complete mess.
Speaking of complete mess, would this void Montenegro's (NATO member) recognition of Sputnik V vaccines?
Since EU can sanction (bully) almost everything, why not vaccines too?
Let's get those people 2 more jabs of Pfizer or they suddenly become unvaccinated.
LOL, what a mess!!!!
Yes, and what about the banana prices on Easter Island!? And whatabout something else irrelevant??
Your lazy pro-fascist grievances are really dull. Did someone ask you to wear a mask? Is this the part where you compare the horrendous experience of civilians getting cluster bombed in Kharkiv (by RUSSIA) to having to wear a mask for a short amount of time? Or being asked to take a potentially life-saving vaccine for free?
Grow up.
And yet you still couldn't grasp the concept, thinking this is all pro-fascist.
People in the middle are suffering for stupid geopolitical reasons such as 2 sides trying to flex their military muscles. When the West is arming Ukraine don't they ever think about how Russia will retaliate.
Do you even think sanctions will stop Russia and help Ukraine rebuild? Again people caught in the middle is the one who suffers, not the leaders...
And yet you still couldn't grasp the concept, thinking this is all pro-fascist.
People in the middle are suffering for stupid geopolitical reasons such as 2 sides trying to flex their military muscles. When the West is arming Ukraine don't they ever think about how Russia will retaliate.
Do you even think sanctions will stop Russia and help Ukraine rebuild? Again people caught in the middle is the one who suffers, not the leaders of either side.
Same goes with the whatever future conflict with China in the next few decades.
Do you really think Biden really cares about these buffer nation in an all out war? Next on the war chopping board is probably Korea or Taiwan, both are oceans away.
Every country has their own agenda and propaganda machine. It's the victors who write history books, not what might have really taken place.
Grow up.
U mad bro?
Also, how do you see “pro-fascist grievances” in this post?