Anti-sanctions measure: Russia is going to withdraw hundreds of aircraft from American and European owners

President Vladimir Putin on Monday signed a law as part of the government’s anti-sanctions measures that would allow Russian airlines to register aircraft leased from foreign companies in Russia, where they will be issued with local certificates of airworthiness, the Kremlin said in a statement.

The bill will allow Russian airlines to keep their planes leased abroad and operate them on domestic routes, while making it harder for foreign companies to return their planes without the approval of the Russian government.

US and European sanctions against Russia require leasing companies to withdraw all aircraft leased to Russian airlines by the end of the month.
Western aircraft manufacturers such as Airbus (EADSF) as well as Boeing (bachelor) have already blocked Russian airlines from accessing the spare parts they need to maintain and operate their aircraft safely. Russian airlines operate 305 Airbus aircraft and 332 Boeing aircraft, according to analyst firm Cirium.

Russia also has 83 regional aircraft from Western manufacturers such as Bombardier, Embraer and ATR. Only 144 aircraft of the operating fleet of Russian airlines were built in Russia.

Cirium data shows that 85% of these foreign-made aircraft are owned by leasing companies, and their combined value is estimated at $12.4 billion.

It is not clear how the leasing companies could take possession of these aircraft while they remain on Russian territory. Additional sanctions barring Russian aircraft from flying to most other countries have limited air travel to mostly domestic flights.

The leasing companies did not respond to a request for comment on Russia’s actions, and it is unclear if they would be willing to return the planes. The planes will not have access to spare parts and will not have valid airworthiness certificates that would be accepted by Western airlines.

“These aircraft will no longer be provided with parts and maintenance,” said Richard Abulafia, managing director of AeroDynamic Advisory. “It’s a real problem if they lose their airworthiness certificates, which can happen if proper records aren’t kept or especially if they’re stripped for parts.”

Losing access to 85% of foreign-made aircraft will deal a serious blow to the country’s economy.

Russia is the largest country in the world by land area, more than twice the size of the continental United States. It needs a viable aviation industry to keep its economy running, said Charles Litchfield, deputy director of the Center for Geoeconomics at the Atlantic Council, an international think tank.

“This is an important part of the Russian economy,” he said. “They want some basic domestic industry to remain in place. Russians don’t fly as much as Americans. They don’t fly to Siberia for holidays.”

Its aviation industry is an important business link not only for international flights but also for domestic flights for its energy sector due to the need for transport engineers., other workers and equipment to and from their far-flung oilfields.

“Aviation is an incredible driver of economic growth both domestically and internationally,” said Robert Mann, an airline consultant and analyst. “Without that, you’re back to a near-agricultural economy, trying to work with the railroad network.”

Russia doesn’t need all the planes it seizes, as the hit to its economy from sanctions would significantly reduce the need for air travel, said Betsy Snyder, credit analyst at Standard & Poor’s, who specializes in aircraft leasing.

“The Russian economy is crashing,” she said. “No one will enter and leave Russia, Russian citizens are losing their money, so they have no money to travel in the future. [airlines] will be a much smaller business.”

This makes it more likely that many of the captured aircraft will be scrapped for parts.

“If you don’t have the authority to manufacture parts, you shouldn’t make them yourself,” Mann said. “You don’t know what standards were used. Have you correctly identified the internal characteristic? When you put it in the turbine section of the engine, will it work as intended?

Mann said that when a part reaches the end of its useful life, known as “green time”, an airline must choose between flying with parts that should have been replaced for safety reasons or stealing parts from other aircraft.

“You can go through this process if you have green time aircraft,” he said. “As you run out of planes, your network gets smaller and you can fly fewer hours every day until you have an airline left.”

Thus, even the preservation of the aircraft will not necessarily ensure the work of the Russian aviation industry. “Any viable aviation industry will cease to exist in Russia in a year,” Abulafia said, adding that its aviation industry could soon be somewhere between the sanctioned industries in Iran and North Korea.

Can a large country like Russia live without a modern, viable aviation industry? “This thesis has never been tested,” Abulafia said. “But it must be.”

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