Plane rental companies “have no hope” that they can get their planes out Russia following sanctions imposed by the European Union, according to a senior international aviation executive.
Meanwhile in Russia on Friday, Rosaviatsia, the country’s federal aviation authority, questioned airlines for details of their lessors and ordered them to notify authorities of any requests to return planes to Ireland.
The regulator required Aeroflot, Rossiya Airlines and S7 to submit detailed information by Saturday noon Moscow time, sources said Irish Independent.
Independent.ie last Sunday revealed the dramatic impact of new EU sanctions on the aircraft leasing sector – including the stark news that hundreds of planes leased to Russian airlines are being recalled.
Russia’s aviation sector has plunged into crisis. At least 137 flights from Moscow’s three main airports were canceled or delayed on Friday in a sign the EU orders are biting, according to a local aviation chief.
Even if fewer planes are flying, that doesn’t mean leasing companies here will easily get them back.
Philip Tozer-Pennington, chief executive of international news and events group Airline Economics, is a senior figure in the industry worldwide, said Philip Tozer-Pennington on FridayThe “general opinion” is that leased planes in Russia will be nationalized and the jets will be banned from export.
In 2014 – at the time of Russia’s annexation of Crimea – Russia warned against nationalizing all of the country’s leased planes in the event of sanctions on planes, he stressed.
This threatens the landlord with a total loss. Nevertheless, the rating agency Fitch sees that the actual financial damage to the sector appears manageable.
“The requirement for aircraft lessors to terminate existing leases with Russian airlines by March 28 should not put material pressure on lessors’ net margins, cash coverage ratios or cash flows over the 12 to 24 months,” Fitch said in an analyst note last night.
And that’s despite billions of dollars of planes linked to Russian airlines, including Aeroflot.
Lessors – many of them either based in Dublin or with significant offices in Ireland – have been scrambling to terminate aircraft leases with Russian airlines by March 28 after the EU imposed a raft of sanctions on Russia following Ukraine’s invasion.
“It’s clearly of concern,” a senior leasing source told the Irish Independent. “It’s impossible to get her out.
“Most of the planes are in Russia,” he said. “How would you get them out? You must obtain airline approval. You must also get the records for the plane.”
“You need Aeroflot to agree to all of this, and you can imagine that’s not coming,” the leasing source said.
“The ability to repossess is impossible. What are you going to do? Get a pony and a sled and drag it across the steppe?”
Between 75 and 80 percent of the fleets of nearly 1,000 commercial airlines in Russia are leased and rely heavily on modern Boeing and Airbus jets.
Dublin-based AerCap – the world’s largest aircraft rental company with more than 2,000 jets – has the largest exposure to the Russian market with about 149 jets. At the end of 2021, those jets accounted for about 5 percent of AerCap’s net book value, or about $1.7 billion.
SMBC Aviation Capital has fewer jets in Russia, but a higher proportion of its portfolio at almost 10 percent, according to Fitch.
Avolon also has jets based in Russia, one of which is reportedly being recovered from Istanbul.
Another leasing source, who spoke on condition of anonymity, said some Russian airlines may believe the war will eventually end and eventually things will return to normal.
In the meantime, he said, they want to make sure they maintain ties with lessors even as the government prevents planes from being taken back.
“I think they will try to do as much as possible without being seen doing anything,” he said of Russian airlines.
This also includes trying to look after and maintain the jets that are on the ground.
Shares in publicly traded AerCap, of which Gus Kelly is CEO, have fallen 22 percent since the day before the Russian invasion. Last year it bought competitor Gecas to create by far the world’s largest lessor.
The company is releasing full-year results on March 30 – just two days after lessors are expected to fully comply with the new sanctions – and managers will provide an update on the state of play.
https://www.independent.ie/business/russian-authorities-quiz-airlines-on-irish-ties-as-departure-boards-go-dark-41413740.html Russian authorities are questioning airlines about Irish connections as departure boards go dark