All’s fair in love and war, right? For aircraft lessors, the kind approach has thus far failed, but reclaiming leased aircraft is not going to be easy in a country that has isolated itself from the rest of the world and could soon close its borders. Meanwhile, Russian airlines have respond to demands to return leased airplanes by stopping payments and breaking off contact.
War In Ukraine Turns The Leased Aircraft Market Upside In Russia
When the war in Ukraine broke out, western powers moved swiftly to impose sanctions upon Russia. Those included the instruction that aircraft leasing companies cease and desist doing business with Russian companies. But what’s a leasing company to do when most or all of their aircraft are within the borders of the Russian Federation…to the tune of 400 jets worth over $10 billion?
While lessors technically face a March 28th deadline, several firms are encountering a familiar pattern: radio silence from their Russian counterparts. Yes, it seems that Russian airlines using leased aircraft will simply stop payment and hold onto the aircraft as long as they can. If war and sanctions continue, that could be for a very long time.
Before Aeroflot suspended international flights, it almost faced aircraft seizure in Abu Dhabi, Bangkok, and Cairo, but managed to narrowly avoid repossession in both instances. However, aircraft were seized in Mexico City and Istanbul according to Reuters.
The global aircraft leasing sector holds roughly half of all the world’s commercial airliners. Traffic from Russia, long seen as a stable investment prior to the war, represents only about 5% of global airline traffic, but still represents a whopping portfolio of value.
Some leasing companies have been trying to unload their portfolios to Chinese companies, which have not severed diplomatic or economic ties with Moscow. However, most offers have been turned down for fear there is no practical or legal enforcement mechanism to get Russian companies to comply.
Now lessors will use their insurance polices to try to collect, representing further uncharted waters of legal uncertainty. Does a war in Ukraine and Western reaction to it trigger payouts? How will lessors prove that airlines or Russia itself has confiscated airplanes when there is only radio silence and they find themselves shut off from entering the country?
And there’s even further peril. Airbus and Boeing have announced, with immediate effect, that Russia is shut off from buying spare parts. If an economic embargo persists, missing maintenance records will permanently diminish the value of the leased aircraft. Furthermore, if outside parts are shut out, Russian aircraft operators will likely pull parts from existing planes, the sort of swapping that severally undermines the confidence in future lessees from that inventory of aircraft.
The War in Ukraine has created a global mess in the leased aircraft market. This is an unprecedented event and it is not clear how things will play out in the months ahead, but it appears to be a grim time for aircraft lessors and the insurance underwriters backing them up.
Didn’t the west started stealing first when they seized the oligarchs’ yachts and stuff?
And you have an issue with that? Even if it was “stealing,” who in their right mind gives a crap what is done to stop Russia – including anything, meaning, anything. Russia has already demonstrated that there are few direct consequences, so why would civilized countries expect there to be direct consequences for an eye for an eye?
West steals russian boats, Russia takes planes. Fair imo. Western hypocrites and their “rule of law based system”
This is a poorly written article. The grammar was so bad it seems more like a foreigner wrote it. I stopped reading after the first couple paragraphs. One would think a journalist would have passed English.
English what? Tea? Cheese? Classes?
Matthew isn’t a journalist, fyi. Nice try, though.
I cut and pasted the whole text into textedit and nothing stood out in spelling/grammar check although I did find one grammar error.
“Meanwhile, Russian airlines have respond[ed] to demands”
The simple solution to this conundrum is to pay to get past a firewall at a mainstream company that hires “journalists’ and get them paid for their time.
Perhaps I don’t mind spelling and grammar issues because I do deal with foreigners often as well as auto translate so learning to handle these communication issues doesn’t bother me but even becomes part of the fun. I ENJOY movies in subtitles.
Didn’t Russia start MURDERING women, children and infants and are still doing so? Hasn’t Russia (Puke-tin) lie to the Russian troops and send them in to die for NOTHING!? Pay attention to the facts lest you be judged for ignorance…
I think you need to change the media that you read in order to rid your brain of the fungi that’s eating it! The author writes ‘a country that has isolated itself from the rest of the world’ What utter nonsense! Not isolated from China, or India, or SE Asia, or the Eurasia heartland, or Africa, or S America! Isolates from theAnglosphere, yes, You Angelo’s certainly live in a different world than the vast majority of humansl
Western media puppet….. You mofo
Nope, that would have been worldwide agreed sanctions.
In regards to these planes however its just outright theft. Only a russian could make a mental lap justifying this kind of non-sense.
What are you? Some kind of moron or just a dick
Waiting on the story about the horrible news on the mask mandate.
Not sure I am going to bother, but it is ridiculous.
Yea at least all those children that are getting blown to pieces in the maternity hospital will never see the horror of wearing a mask on a plane.
Get a grip.
And in your warped mind kids shouldn’t complain about being molested either, right? At least it’s better than being in a hospital in a country at war.
Kids wearing masks ≠ kids being molested. Nice try though.
IGNORANCE IS BLISS, EH?
YOU’RE RESPONSE IS INVALID
AS WELL AS ABSURD!!!
What kind of a sniffling man child writes that. hmmm. Somebody needs a gold star…
One that’s sick of people acting like a mask mandate is the greatest injustice in the history of civilization. I wish these people would experience real hardship then come back and complain about a mask.
So true, so true….but to these entitled children, it really is the greatest injustice they have ever experienced, and will continue to let us know that for the foreseeable future.
I’m really curious as to what their grievance will be once the mandates are lifted. My guess is something about Hillary or Obama….they never tire of whining about them.
All fairs if you are rich. Do you really think these sanctions are going to make the oligarchs poor? It should, but it won’t because, it’s for show. About everything the oligarchs own should be worthless now if the sanctions would be as biting in real life. There are probably enough loopholes for them to squeeze through.
The government comes like a rabid dog after poor people for tax irregularities than it will for sanction busters. Already Deutsche bank is saying it won’t leave Russia. Germans are becoming the new Swiss. Will Deutsche bank be sanctioned? Banks routinely are found guilty of money laundering are slapped on the wrist, fined as cost of doing business and stay to break more laws.
Next time you are in the jury stop worrying if someone has broken the law and worry if the laws are equal and really being applied equally in terms of their impact. You should find the defendant not guilty in most except the most egregious cases, irrespective of what facts are presented in the case. Just don’t even listen to the crap the prosecutors present.
For the first time ever, I am in 100% agreement with one of your comments Debit. Well said.
Obviously you have little experience in the American Judicial System. Facts matter, the laws matter and who presents them matters!
Not mentioned is how much of that $10Bn has been paid and how much profit has been made in the past 30 years?
More to all of this than your simplified, “tit for tat.”
Another problem is that for the sanctions to work they’ll need to stay in effect long after this conflict ends, which most likely won’t happen. Russia needs to be cut off for a very long time else what’s to stop them when they want something else? Greater access to the Baltic seems likely as well.
Russia should be banished from the world stage for the next 1,000 years.
They are a totally lawless gang of criminals.
I agree 100% with Robert, except it should be 2000 years.
I just realized there could be a market for Repo Pilots willing to enter Russia and grab them. Now that would make a movie!
LOL. That would be risky business!
Transporter– Russia thrift
One would need approval to fly or ferry out in Russian airspace from the civil aviation authority. On a practical level, the airline could prevent repo by removing a few boxes from the avionics compartments or robbing a few parts. Grabbing aircraft and flying out is not so simple.
Debit with his unique view on jury service. He probably voted in the last Presidential election for some guy that worked hard to restore citizenship to the late President Jefferson Davis. After all, facts don’t matter to Debit.
If you are an Oligarch the one thing you have got used to, is to do what you want when you want, by land sea or air. Suddenly their aircraft, choppers, mega yachts or limos can’t move around like before. They can’t just turn up at one of their many homes, their staff will get laid off (as is the case with their yachts) and so maintenance issues kick in. You might even lose a billion or two on a football Club like Chelsea FC? Now to the poor or middle classes like Debit describes, this is no big deal. Sanctions are not about making Oligarchs poor, it is about making them sever ties with their Master because hitting them in the pocket hurts them more. What’s the alternative? Sleepy Joe sending Troops to the Polish Border to fight Russia? For those who leased aircraft to Russia they should have been more astute. But like the Oligarchs, greed got the better of them all!
Roman Abrahamovic is a Portuguese-Russian (and maybe Israeli?) citizen, and so sanctioning him in Portugal doesn’t really fly because punishing him in the absence of a court trial is not considered acceptable when directed against its own citizens. [Even EU sanctions are a bit complicated when it comes to EU citizens, although arguably other EU member states can sanction other member states’ citizens.] Portugal is currently investigating the legitimacy of RA’s acquisition of Portuguese citizenship on the basis of being a descendant of Sephardic Jews who left Portugal during the period when Portugal and Spain were purging Muslims and Jews from their homes in the Iberian Peninsula
So what? He’s just lost his Football Club, his yachts are navigating a spurious route to where ever they are safe and his aircraft have a problem as to where they can put down. Not to mention why he didn’t want to be a Russian Citizen any more? Life aint what it used to be and that’s the real point, never mind the Legalities. Oligarchs don’t do Queensbury Rules, nor should we! Hit them hard, every which way but how!
Nothing but stunned at those who think rules still exist – this is a free for all that needs to be crushed with a ruleless response by the rest of the world.
Be careful of name calling: ” sleepyjoe? So what purpose have you served with your life?
Some.of you are just missing the point. When you have something of value ( and Don’t hate the Olichards fir their wealth: that’s petty) sanctions and restrictions become an annoyance to your way of life and it will bring g about changes. Just what do you think those average, deceived Russian is going to do when they too realize the loss of access to goods and services. This is call strategic planning
You nailed it. GREED!
Seems like insurance/re-insurance companies want out of the business of insuring flights to/from/over Russia. Some non-Russian airlines are having to stop flights to and from Russia because of changes to insurance coverage.
The Russian government may become the insurance backstop for some airline operators in Russia when the global insurance market isn’t accessible like it was.
Russian reinsurers have actually dominated the high risk sector (think flights to Syria, Libya, Somalia, etc..) over the last few years. It will take a while to unwind and replace existing policies but this can easily be sorted out provided the existing back door finance channels remain in place (UAE, Turkey, India, China to name a few).
Some lessees with propose ridiculous payment terms when the sanctions end and they want more planes. Others will keep the planes until they cannot get spare parts. Iranian airlines managed to keep its 727’s flying for a long time.
Sanctions will hurt Western companies and people unevenly. Some will not be affected too much because their exposure to Russia is low. Some will be hurt a lot.
We saw an example of how to be an ideal juror during the second impeachment trial of the last president. Just forget about law and think about loyalty to your clan, family, race and spirituality or whatever other excuse you want to make up.
^ reply to aloha
Imma call Ontario and have them kill the engines.
Send in the Repo Man!
Autocorrect killed the joke.
LETS PICK UP THE LEASED AIRCRAFT FROM RUSSIA.which way are we going to do it.? BY AIR, BY TRAIN, BY OCEAN?
Digging an underground tunnel from the US to Russian airports gets my vote!
Missiles do a pretty good job when you don’t have the key.
Those air[planes are worthless for two reasons. First with no parts available they will so be unable to fly. Second No one in their right mind would be one after they loose the war because you’d never get it FAA approved.
Geez, buddy. You need to fire your proofreader. He’s screwing you.
Awww….poor billion dollar companies loosing a few of their planes. Maybe airlines should stop doing idiotic things like leasing aircraft that make the whole of air travel more expensive for the flying public and use some of the massive tax bailouts they have been given to buy aircraft. Oh, that’s right, they have already given all that money away to their work shy executives. Sucks to be you I guess.
And be apprised of the fact that the US government has frozen the foreign currency assets of the Russian central bank. This is step one in the illegal theft of those funds. American thugs have a lot of experience with this kind of thievery. Check it out for yourself.
The simple way to handle it is allow creditors of Russia to make a claim against Russia’s 600 billion in frozen foreign exchange reserves. This money should be used to rebuild Ukraine.
Lol The Author neglets to state the facts. The West froze Russians money and diaconnected Russian banks from the banking industry. How did they ecpext Russia to pay its international bills
Russia will pay them with vouchers or vodka
Blame Putin but let me assure you when his inner circle gets nervous it’ll be the beginning of the end they will use an old KGB tactic on him and put a hole right behind his ear then maybe Russia can get someone with some sense.
War report. Our relatives in Lviv and Odessa are fine, for now. I suggest if you’re interested in more direct coverage of the conflict to consider Russian ex-pat journal meduza.io (run through google translate). In particular, they did an analysis of the impact of the economic sanctions and they are quite extraordinary. In just a week, things have decayed back to the 90’s with major industry supply chain issues making COVID look like a picnic. My wife told me stories from the old USSR. Say there was a Soviet microwave oven you wanted to make. Transformer made in Poland, magnetron in Uzbekistan, control panel in Russia and case in Armenia. Two out of those are shut down. The whole thing collapses.
Part of the reason why old folks were nostalgic for the old USSR was the traumatizing effects of the 90’s collapse and how harsh it was. I know awful stories. This is partly why they liked Putin because he represented Khrushchev like order. That order is collapsing in DAYS from what I’ve heard from family friends.
It’s awful. I pray for peace for all involved except, of course, for Putin. Heck, I have friends of all ideological backgrounds but I don’t wish them ill will.
One thing is for sure: It will take decades to clean up this mess in Russia and Ukraine.
What is the issue here? The west started the stealing. The thefts of oligarchs is not legal whatsoever. But now Russia counters back by not giving up leased planes? Blame the west got that because they are the ones who forced companies to cut ties out of anger.. So this is what being angry gets you… Nothing..
Remember when the Michael Jordan’s yacht got confiscated when Iraq was illegally invaded by the US? Exaclty…….
If Donald Trump was still in his rightful position, we wouldn’t have this problem. He would have nuked the sh*it out of Putin and all the oil and gas in Russia would now be ours. The liberal communist media, like CNN and NBC, laughed at him like always, but Trump would have made it even possible that China and Russia end up in a huge war over this and so he would have rid us of the two of them once and for all. Trump 2024 – or sooner, folks!
I like how you mentioned this is a one-of-a-kind occurrence, and it’s unclear how things will pan out in the coming months, but it seems to be a bleak moment for aircraft lessors and the insurers that back them up. When I was in college I think about it differently, there is really numerous information in this article that helps me. I’m grateful for your advice about airplane repo attorney.