Russia Passes Law to Take Control of Foreign Planes in Country

by Chris Haney
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On Monday, Russia passed legislation that will allow the country’s airlines to keep planes that were leased from foreign companies. Russian President Vladimir Putin signed off on the law that gives airlines the right to re-register hundreds of planes so the companies can continue flying them domestically. The move allows Russian airlines to keep the foreign fleets operational within Russia so they don’t fall under Western sanctions.

Russia currently has hundreds of leased planes from abroad, which airlines use for domestic and international travel. The law is an effort to keep planes in Russia so that travel is not interrupted. Western sanctions against Russia quickly followed after the country invaded Ukraine. Certain sanctions gave plane leasing firms until March 28 to repossess any aircraft from Russia. But Putin’s new law now prevents lessors from seizing their aircraft and allows Russian airlines to keep the airplanes within the country’s borders.

What You Need To Know

  • Russian President Vladimir Putin passed a law that allows Russia to keep leased planes in the country.
  • The law allows Russian airlines to re-register the aircrafts as a way to bypass Western sanctions.
  • Sanctions gave foreign plane leasing firms until March 28 to repossess their aircrafts.
  • Putin’s new law will impact more than 500 leased planes from abroad.
  • The new bill supports domestic airlines so that flights in Russia will stay on schedule.

Putin’s New Law Allows Domestic Airlines to Keep 515 Planes In Russia

Monday’s new legislation will impact more than 500 planes that Russian airlines leased from foreign companies. Russian airlines lease around 780 aircraft in total, with 515 leased from abroad. Ireland and Bermuda have provided the majority of the foreign-leased planes operating in Russia.

In February, the European Union banned the sale or leasing of planes in Russia as part of various sanctions for the ongoing war in Ukraine. As part of the EU, Ireland suspended their certificates of airworthiness in Russia for their leased planes. In fact, without a certificate of airworthiness, the planes are not allowed to fly. Civil aviation authorities issue the certificates in the country where the planes are registered. Therefore Russia’s new law allowing airlines to re-register the leased planes from abroad would bypass that requirement.

Previous to passing the bill, Russia’s air-transport agency suggested that airlines don’t fly foreign-registered planes out of the country. The agency advised keeping the leased planes in Russia so the lessors couldn’t repossess them. According to multiple reports, President Putin signed the bill to support domestic airlines and flights within Russia. The move is intended “to ensure the uninterrupted functioning of activities in the field of civil aviation” in the country.

Russia Is Essentially Commandeering $12 Billion Worth Of Planes

Following Putin’s new law, Russian airlines are now holding onto $12 billion worth of planes that are not their own. Almost half of those leased planes are coming from Irish-based lessors.

Aviation analyst Helane Becker who works for Cowen, a financial services firm, spoke with AP writer David Koening recently. She explained that Putin’s new law breaks the Chicago Convention, which dates back to the 1940s. The decades-long aviation treaty allows lessors to cross international borders to repossess planes from defaulting customers.

“We are in uncharted territory. We don’t know if they will see these aircraft again,” Becker explained. “Our guess is that (Russian carriers) use up whatever parts they have and then start cannibalizing (parts) to keep aircraft flying.”

IBA, an award-winning aviation advisory, has shared that Dublin-based AerCap is most at risk. The new law in Russia will impact 152 planes from the company that they leased valued at almost $2.4 billion. AerCap has not been able to recover any of their fleet from Russia so far.

SMBC Aviation Capital, another Irish lessor, leased 35 planes to Russia. IBA values the fleet at around $1.4 billion. SMBC terminated all Russian airline leases and a spokesman said the company “is engaged with all relevant authorities.”

IBA also shared statistics about Russian airlines and their leased planes. As of last week, Russian airline S7 has the most foreign airplanes with 101 aircraft leased from non-Russian companies. Aeroflot came in a close second with 89 planes leased from foreign companies. The most popular planes leased to Russian airliners are the Boeing 737 and Airbus A320 jets. Each are commercial aircraft used primarily for short and medium-range flights.

Outsider.com