Russian Theft of 515 Leased Airplanes Is Happening Now
Russia had until yesterday to return 500 airplanes leased to various airline companies as worldwide sanctions against Russia come to a head. They mostly belong to lessors in the EU. But those aircraft are still flying Russian domestic routes today. And even if returned, will they be airworthy, or will their logs evaporate?
How much would 500 Russian airplanes be worth?
According to Reuters, the leased Russian airplanes’ estimated worth is over $10 billion. Most of the registered planes come from Bermuda and Ireland. Both countries have suspended airworthiness certificates for the planes. That should implement grounding them, but that isn’t happening either.
Lessors are gearing up for huge writedowns as well as legal fights with insurers. Insurance companies may not honor the losses because EU sanctions are unprecedented, and involve so many aircraft. But the defaults look inevitable as last week Russia moved many of the planes into its own registry.
Russia has registered them on the Russian registry
So technically, the planes now belong to Russia and not European lessors. Russia’s Prime Minister Mikhail Mishustin says that the only reason for the registry change is “to ensure the uninterrupted functioning of activities in the field of civil aviation.” International law forbids registering aircraft in multiple countries simultaneously. Russia has 35 airline companies, some of which are reluctant to switch registration fearing what could happen after the war in Ukraine is over.
Some EU companies have tracked down Russian airplanes outside of the country and seized them before they could get back into Russia’s airspace. Russia’s state aviation authority wants airlines owning leased planes not to fly them outside of the country. But another problem facing lessors is will the Russian planes be airworthy?
Are these Russian planes airworthy anymore?
What happens if Russia doesn’t return maintenance records? Then determining what repairs occurred will be impossible. Did the Russians use approved components? Or were bootlegged replacements the choice pushed by the Russian government? Replacement parts used on aircraft must be traceable.
Since the sanctions were first imposed, the cancelation of all airline component orders and manufacturing services went into effect. Russia says it is being guided by Iran’s process of servicing planes under those conditions.
The good news for leasing companies is that generally, their inventory of Russian leased planes is only 10 percent. While losses involving that much of a company’s stock will hurt, it is probably manageable. But even if insurance companies end up paying them off, it might take years of legal fights involving airlines, lessors, and the insurance companies.
This ‘changes the future market potential of Russia’
“It’s not going to cripple these businesses,” Alton Aviation director Brad Dailey told Reuters. “What it does do, in my view, is it changes the future market potential of Russia.” As revenge for being cut off from international banks, Russia pays debts in virtually worthless Rubles.
So while the sanctions are retaliation against Russia for invading Ukraine, those same sanctions are beginning to hurt western countries as Russia fights back.