Russian airlines' leased planes: Airlines go domestic to prevent confiscation of aircraft

Russia's airlines have something that's not theirs, and it's causing sleepless nights for aviation industry leasing executives in Dublin.

According to Cirium, which analyses aviation industry data, there are 515 aircraft on lease to Russian operators which are owned by foreign entities, out of a total Russian commercial fleet of 980. Most of those aircraft are Airbus A320s and Boeing 737s leased from AerCap and SMBC Aviation Capital, both based in the Republic of Ireland. In response to Russia's invasion of Ukraine, EU sanctions have been imposed that require the termination of all such leases by March 28, 2022, but it looks like Russia isn't going to play ball.

National carrier Aeroflot has already signalled a firm "nyet" in response to requests to hand over the goods, according to the website FrequentFlyers.ru. Since those aircraft are on Russian territory, and possession is 9/10ths of the law, Aeroflot holds all the aces. There might be what sources within Aeroflot are calling a requisition, a forced purchase with terms favourable to the state-owned airline, or possibly a nationalisation of all those leased aircraft, on the grounds that the EU has blocked Russia's access to its gold and foreign exchange reserves sequestered in European and US banks and therefore the airline can't pay up.

Apart from shouting loudly and jumping up and down, those aircraft leasing operators don't have many levers to pull to get their aircraft back. Their aircraft are in Russian territory, and far from any jurisdiction likely to react sympathetically to any request to hand them back. Send repo teams to Russia to take possession of the aircraft and fly them out? Not likely to get very far, although it might make a decent action movie. Threaten sanctions? Those big guns have already been fired.

Deny spare parts, maintenance and tech support? Boeing has reportedly already done that to all its aircraft in Russia, but that can be circumvented with the connivance of Russian allies. Investors smelled trouble. Between February 25, the day after Russia began its invasion of Ukraine, and March 8, shares of AerCap in New York fell by almost 30 per cent.

Given the chances of repossession action being taken to recover an aircraft leased to a Russian airline while on the ground in a third country, it's possible that no Russian airline is operating leased jets anywhere outside Russian territory, or at least that of an ally where it feels sufficiently secure. A March 3rd attempt to repossess an Airbus A321neo leased by Aeroflot when it landed in Cairo went south when the aircraft escaped by the skin of its teeth. Since that date the aircraft, registration VP-BXT, appears to be operating solely on Aeroflot's domestic sectors.

With European and North American airports closed to Russian aircraft, the Aeroflot route map is going to look a whole lot less like a lava lamp. Broadly speaking, Russians are keen travellers. In the first half of 2019 Russians made almost 20 million trips abroad. The number one destination was Turkey, followed by Finland, Kazakhstan, China and Ukraine. However, Aeroflot has been ordered to stop flying internationally (except to Belarus) over fears its aircraft will be seized, but Russians can still fly to Beijing, Tajikistan, Sharjah, Abu Dhabi, Serbia and, somewhat surprisingly, Israel, either on Russian or foreign airlines. But travelling internationally is still a risky proposition for Russians - thousands are currently stranded in Thailand with no access to their money and with their flights home cancelled thanks to sanctions.

Why airlines lease aircraft?

Between them, the world's leasing operators account for over 13,000 commercial aircraft with a total value in excess of US$300 billion. That figure is about half the total value of the world's commercial airline fleet.